The SPX is at at top end of its 1275-1295 resistance level, a breakout from here could carry the index back to the 1325-1350 level. If the index gets stopped in its tracks however, this could lead to another visit to the 1220 mark.
In order to protect ourselves as we enter a less favorable period for stocks later this month, and into the fall, I wanted to show you a list of ETF's that provide double the daily inverse of the key market indexes;
QID- ProShares UltraShort QQQ: $67.00- $3.25
DXD- ProShares UltraShort Dow 30: $67.82- $1.54
SDS- ProShares UltraShort S&P 500: $67.86- $1.04
I don't know if the indexes will breakout from here, so if you decide to buy any of these market inverse funds, be prepared to dollar cost average in if the market rallies back to its highs for the year. Also keep in mind these funds attempt to double (x 2) the daily inverse of their respective index.
Comments (1)
Hi John,
I read a lot of blogs on a regular basis. Quite a few of them have been suggesting inverse ETFs to protect yourself against a market down turn.
I have not seen a single article detailing the pros and cons of protecting yourself using inverse ETFs vs. puts. Should you care to detail such pros and cons, I, and presumably your other readers, might find the article useful.
p.s. I have also read on other blogs that these double inverse ETFs have a less than stellar performance record - they tend to go down twice as much when the market goes up, but go up only 1.5 times when it goes down - making them a bad risk/reward solution.
Posted by jragusa | August 16, 2006 10:46 PM
Posted on August 16, 2006 22:46