UltraShort Basic Materials ProShares (SMN)

I called it exactly right the last two times, bouncing in and out of this pick. Let's see if I can do it again. As I see it, this pick (one of a collection of Short ETFs) is due for a rise as the rest of the market sours on Geithner's plans. The market is still well-overvalued, and needs to fall 25% more (down to about 5500 on the DJIA) to even begin to come in line with the traditional P/E ratios of bear markets. It's not going to fall all that way in one fell swoop (hopefully not, for that would really freak out those who've not been paying attention), but I do anticipate it oscillating and trending downwards. Until that "bottom" is finally reached, however, I intend to make some points (and some money on limited ETF selections) during this time.

I may be a little early on this one (just like the last time I played this swing), but from what I'm seeing in the Slow Stochastics regarding this ETF, it is due for a turnaround, a rise from this point. I'm hoping this will happen in the next 2-3 weeks, if not sooner.

To me, it's clear from the Slow Stochastics of some big ETFs that they are due for a turn-around. Take a look at TZA, ERY, BGZ, QID, SDD, SDK, RWM, SFK, and SJF, to name a few. All are below the 20% "oversold" line, some below the 10% line, meaning they are more likely to rise than fall further, and soon. The "Williams%R" indicator, which leads the Slow Stochs by a few days, is showing even greater "oversold" tendencies, and in some cases is starting to head back up. Geithner's plans released on March 22, 2009, certainly put a hold on this ETF rising, but that hold will be only temporary, as I see it.

Again, like I wrote last time, if investing for the masses is anything, it's psychological. So, I think we'll see a general fall in the major indices starting next week as despair once again begins to settle in on Joe Investor and people realize that Geithner's plan really only help out the banks at the taxpayers' expense. This downturn should run for 2-5 weeks, depending upon what actions the Fed takes (like putting a ban on short selling again, which would not surprise me). That sort of ban would weaken my case for these ETFs, but it's not going to stop the freight train that is coming down the tracks.

Finally, let me be absolutely clear: I still believe we are definitely NOT at THE bottom. We have at least another 25% to fall:
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=137397&t=01009471911616523983

If you do not have time to watch your purchases over the next 2-5 weeks, don't play the game. I have a feeling it's going to be very volatile and too risky for most people (probably including myself, if I had any sense at all). Good luck!

Not going to build a lot of new houses.

Basic Materials Ultrashort.

So I picked red thumb on this a while back simply because it was an ultra short fund. I've come back to it wondering about my move from here. I was going to close this because we the prices of basic materials are getting fairly pricey. I did some math on the back of a receipt and here is the theory I came up with.

With a LONG RUN red thumb you are getting:
- 0% + Inflation + plus small crowded world effect. Lets call it +3.5%. This is an inverse fund, so +7%.
- Red thumb gives me that .95% expense ratio.
- The long run market returns for the S&P will be around 8% (the days of 10% are gone). So with a red thumb that is added to my score.

7% + .95% + 8% = +15.95%. Now compare that with the risk of a bubble bursting. IE if the bubble bursts today and hammers me for -32%, it'll take 2 years to break even. I doubt the burst will be that significant, The red thumb seems sound.

Very very quick calcs, I could be stupid.

Because Ultras Suck

leverage eats away returns

u.s. stimulus plan is a joke

bullish

Latest mini-bubble from rebound should deflate once again to test or surpass prior lows.

All assets deflate in a Depression

I'm "all in" betting on a correction sometime over the next 2 Quarters.

Ultra funds suck in the long term to begin with. Couple that with general outperform on hard assets over the next couple of years....

Gold, silver and copper are set for a huge run. Especially copper.

bullish

This market is way overbought and it is time for a much needed correction. S&P P/E is at all time highs and needs about a 20% correction. In closing, I like beer.

Ultra-shorts and Ultra-pros are all bad investments due to daily rebalancing

tmfeldrehed

shorting all ultrashorts, bears, and other "leveraged" funds.

UltraShort Basic Materials ProShares
$21.41 -0.85 (-3.82%)
5/14/2009 12:21 PM
52 week $15.94-$133.58

Testing a theory here with this account, shorting all short ProShares for starters.