Tuesday, August 21, 2007
A 'short' look at Proshares ETFs
“From the high in June, the S&P 500 Index has dropped 10.3%,” says Jim Farrish in his SectorExchange.com. Here, he looks at ProShares ETFs that go short the S&P indices.
“Currently, nobody trusts the market or what anyone has to say about long term the markets are cheap. This sounds like trying to convince someone to buy your home in the current real estate market.
“Meanwhile, mortgage-backed securities are an issue for the market and the economy. The challenge is no market (buyers have stepped away). Dominos are falling and triggering the events. Credit is no longer being extended. Hedge funds are going out of business and mortgage brokers are going out of business. Banks and brokerages are charging off bad debt due to the changes.
"With lending getting tighter this could compound the issues facing the housing market. This should stabilize over time. Until then the extent of the damage is the unknown concern attempting to be priced into the markets.
"Meanwhile, the markets are acting like a bottom is being established, but that could just be wishful thinking. The market remains focused on the negative. This is keeping the sentiment negative as well. We are not convinced there is enough bullish sentiment yet to prompt enough buying to overcome the bears.
“The Dow, S&P 500, 400 & 600 and NASDAQ all breaking support and giving a short signal for entry. Therefore, we are recommending ProShares short ETF's. No magic to these; they just work well for what we are looking for here -- a short position for the near-term.
“Fear remains in the markets and not much to look at when it comes to the bullish side. We have now exited the majority of our long positions and now wait to see how this plays out near term. In our sector portfolio, we have taken positions in ProShares S&P 400 Short (ASE: MYY), ProShares S&P 500 Short (ASE: SH), and ProShares S&P 600 Short (ASE: SBB)."
posted at 3:10 PM
