SKF Proshares Ultrashort Financials and FAZ update...

originally published May 21st, 2009

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• SKF Proshares Ultrashort Financials and FAZ update...
  May 21st, 2009

The broad stockmarket is looking really vulnerable now. Yesterday's action was bearish with it closing near to the day's lows after a failed run at its earlier highs, and this has spilled over into other world markets overnight.

Anyone wishing to capitalize on a substantial reaction in the broad stockmarket, especially the overblown Financial sector can utilize this ETF, which has suffered a stunning decline from over $260 per unit early in March to the current price of about $45. In the event that the broad market now goes into retreat as expected, this should advance strongly as should the Direxion ETF, code FAZ.

On the 6-month chart for SKF we can see that although it has yet to break out upside from the severe downtrend in force from early March, upside volume has increased significantly in recent weeks, driving the volume indicators shown at the top and bottom of the chart strongly higher. This is a sign that breakout is imminent, and that, by extension, the broad market, especially the financial sector, is about to take a hit. The same big buildup in upside volume is evident in FAZ, which is expected to advance strongly along with SKF. This is hardly surprising as the rally of the past couple of months is largely the result of short covering precipitated by wishful thinking on the part of bulls and fuelled by a generous dose of hype from the media. Wall St has completed its program of offloading stock onto retail investors, and professionals are thought to have gone heavily short again, using vehicles such as this.

ProShares website

Proshares Ultrashort Financials, SKF, closed at $45.30 on 20 May 09.

Posted at 9.25 am on 21st May 09.