Today we have two short-term ETF recommendations, designed to play macro trends, from The National Investor.
“The same pattern is emerging this morning that I commented on last week, as traders overseas flee risk assets. ... As I suggested in last week’s missive, we’re better off adding to our bets against risk assets via those ETF’s which short foreign indices; and I feel that we limit our downside risk this way too, as, 1) These foreign bourses should continue to do worse than the U.S. in a correction and 2) We get an added boost, especially against European stocks, if the dollar gains further against the euro, which I expect in the near term.
New Recommendations
1. Direxion Daily Emerging Markets Bear 3X Shares (EDZ)
“This is one of the more leveraged ETF’s out there; the fund seeks to achieve daily investment results that, before fees and expenses, are three times that of the inverse, or opposite, of the MSCI (Morgan Stanley Capital International) Emerging Markets Index. The Index is an amalgamation of 26 different markets: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela.
“These markets are likely to underperform U.S. markets for the foreseeable future as traders shift to more of a risk-off posture, and fret over global growth.
2. ProShares UltraShort MSCI Europe (EPV)
“In this case, the ProShares offering seeks twice the daily opposite, before fees and expenses, of the performance of Morgan Stanley’s European Index; it is comprised of pretty well all the major European bourses. Here again, it is likely in the near term that those markets will deteriorate over recession fears and the never-ending soap opera over the euro.
Allocations
“Both EDZ and EPV are started as an ‘Accumulate.’ ... Begin taking positions today; watch these for any mid-day weakness over the next few sessions to dollar-cost-average into a position. If we see markets deteriorate further over the next week or two I may increase these recommended allocations.
“As I mentioned last week, these two ETF’s should be viewed as short-term trades that we might stay in for a month or so.”
- Chris Temple, The National Investor, March 29, 2012