Another day, another intrday record for the Dow Jones
Industrial Average. Buoyed by a stronger-than-expected February
jobs report, U.S. stocks continue to grind higher.
Friday's action is of the modesty variety, perhaps
disappointing eager bulls that were expecting more on the back of
the jobs report.
Despite the Friday lethargy, nearly 300
tracking a variety of asset classes and sectors are close to
or have already made new highs
That can be interpreted as a positive sign and perhaps open
the door for aggressive traders to embrace some bullish leveraged
With the benefit of the SPDR S&P 500 (NYSE:
) rising nearly nine percent year-to-date, plenty of leveraged
bull ETFs have soared as well and now look overbought.
When it comes to using these funds over the next few weeks,
the key for traders is focusing on situations, meaning
identification of leveraged ETFs that are or close to a potential
sweet spot that can lead to further near-term upside. Consider
ProShares Ultra Financials (NYSE:
) Plenty of traders are talking about the recent bullishness in
the Financial Select Sector SPDR (NYSE:
), the largest ETF tracking financial services stocks.
With good reason, too. The stress results released on Thursday
were mostly positive and that was enough to extend XLF's
impressive year-to-date performance which has the ETF hovering
near a new 52-week high.
Bringing the conversation back to UYG, this double leveraged
ETF is not a play on XLF. Rather, UYG attempts to deliver two
times the daily performance of the index tracked by the iShares
Dow Jones U.S. Financial Sector Index Fund (NYSE:
), an ETF that has slightly outpaced XLF this year.
was noted on Thursday
, the Comprehensive Capital Analysis and Review stress test
results are due out next week.
That is when the Federal Reserve can approve or reject banks'
capital plans such as dividends and share buybacks. In other
words, a significant catalyst could be looming over the next few
days for UYG.
ProShares Ultra Nasdaq Biotechnology (NASDAQ:
) The ProShares Ultra Nasdaq Biotechnology is the
double-leveraged answer to the $2.37 billion iShares Nasdaq
Biotechnology Index Fund (NASDAQ:
That means that IBB and its holdings such as Gilead Sciences
), Amgen (NASDAQ:
) and Celgene (NASDAQ:
) are the names traders in BIB will want to keep an eye on.
One of the more obvious reasons to embrace BIB is that IBB is
not just making new 52-highs, it is making all-time highs. So are
the other major non-leveraged biotech ETFs such as the First
Trust NYSE Arca Biotech Index Fund (NYSE:
) and the SPDR S&P Biotechnology ETF (NYSE:
Another reason to consider BIB is that biotech stocks have
proven resilient to global macroeconomic headwinds. In other
words, the sector's
relatively low correlation to the S&P 500 can be a good
ProShares UltraShort Yen (NYSE:
) Alright, so we fibbed a bit because the ProShares UltraShort
Yen is a bearish play on the yen. However, that means it is a
bullish play on the U.S. dollar against the Japanese
Technicalities aside, USD/JPY is trading at its highest levels
in nearly four years and the yen is battling with the British
pound for the dubious honor of the world's worst-performing
developed market currency in 2013.
Here is the lingering catalyst for YCS, though it will require
hanging onto the ETF for a few weeks. The next Bank of Japan
meeting is in early April and that will be the first with
(presumably) Haruhio Kuroda at the helm. Prime Minister Shinzo
Abe nominated Kuroda because the latter favors higher inflation
and a weaker yen.
Along those lines, it would not be surprising to see BoJ
announce new monetary stimulus measures that go into effect soon
after the April meeting. That means the yen likely falls and YCS
keeps going higher.
For more on ETFs, click
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