So far, 2013 has been a good year in which to be long
equities. A year-to-date gain of 6.7 percent for the SPDR S&P
) affirms as much. However, that does not mean all sectors and
asset classes are working.
In fact, a screen for laggard
nearly 80 funds are currently sporting
year-to-date losses of 10 percent or more
. Predictably, plenty of the members of that ominous list are
leveraged ETFs, but a fair amount (more than 25 percent) are
There is plenty of time left in 2013 for some of these ETFs to
get their respective acts together and move to the upside, but in
the case of some (think gold miners), early-year damage says
these funds are no more than falling knives right now. That is
falling knives that investors should attempt to catch. Down
appears to be the near-term path of least resistance for the
Direxion Daily Gold Miners Bull 3X Shares (NYSE:
) The Direxion Daily Gold Miners Bull 3X Shares is arguably the
epitome of an ETF falling knife in 2013. So bad have things
gotten for this triple leveraged play that it will
undergo a 1-for-5 reverse split on April 1
That might be good news for eager shorts looking to pound NUGT
from a higher price. Seemingly, the near-term view of gold miners
as a group is quite simple. Gold futures
are challenged on a technical basis
and getting worse with almost every passing day. Since the miners
did participate much in gold's upside, it is not surprising to
see the group suffer as bullion tumbles.
Bottom line: The more fears escalate about gold's 12-year bull
market coming to an end, the more the miners will suffer.
Fortunately, traders do not need to short NUGT directly. They
merely need to go long the Direxion Daily Gold Miners Bear 3X
) to participate in more downside for the miners.
EGShares India Infrastructure ETF (NYSE:
) After ending 2012 in solid form, India ETFs have been epic
disappointments in 2013. As is the case with NUGT, it is easy to
understand why ETFs tracking Asia's third-largest economy have
delivered no more than heartache to the bulls this year and the
reasons extend beyond mere weakness in the broader emerging
Taking a page from the U.S. handbook of electoral politics.
India unveiled a larger-than-expected fiscal 2013-14 budget last
week, which includes plenty of government spending ahead of next
year's elections. There are several problems with that budget.
First, financial markets have shown little tolerance for
increased government spending in India.
Second, Fitch Ratings came right out and said
India is in danger of losing its investment-grade
. Third, India has well-documented infrastructure woes, but the
new budget has done nothing to buoy the fortunes of INXX. The ETF
has lost 4.2 percent in the past week and violated support at
$13.50, indicating that its next stop could be the September low
just under $12.
PureFunds ISE Junior Silver ETF (NYSE:
) Talk about a case of bad timing. The PureFunds ISE Junior
Silver ETF debuted late last year as a small-cap alternative to
popular large-cap focused silver miner funds such as the Global X
Silver Miners ETF (NYSE:
). Problem is silver, like gold, has been tumbling this year. The
iShares Silver Trust (NYSE:
) is down almost 6.2 percent.
As has been the case with gold and the gold miners, silver
miners are declining at a more rapid clip than prices of the
metal they extract from the earth. Translation: SILJ is off 16.5
percent year-to-date. Some investors may be apt to avoid to SILJ
simply because it is a new ETF. That misses the point. At the
moment, precious metals miners as a group are not working for
investors from the long side.
However, given silver's reputation for volatility, SILJ is
worth tracking for a bounce and should not be dismissed as
potentially profitable trade due to its age.
For more on ETFs, click
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