On the back of some slack economic data, surging U.S. oil
inventories and speculation that the Federal Reserve could end
its bond-buying program as soon as this summer, U.S. stocks
plunged Wednesday. The tumble came just a day after the S&P
500 touched a new record high.
One day of glum market action does not necessarily mean the
start of an imminent, savage downturn. Still, Wednesday's action
in select inverse
may be a sign that more downside is on the way. At least for
countries and sectors these ETFs track.
At this point, it should go without saying that leveraged
ETFs, both the bullish and bearish plays, are short-term
instruments. Knowing that, the plethora of critics this asset
class has might be apt to say these ETFs are not the best
harbingers of things to come. That point can be argued, but in
the cases of select bearish funds, Wednesday's action was merely
the extension of recent trends and those trends should not be
Bad Emerging Markets Continue to be Bad Well-documented have
the struggles of the largest emerging markets,
BRIC in particular, this year
. That was again the case on Wednesday.
Start with the ProShares UltraShort Brazil (NYSE:
). That double leveraged bearish play on sagging Brazilian
equities, was up almost one percent Wednesday. Naysayers will
point the below average volume and that is a fair argument.
On a related note, China bulls will not like the fact that the
ProShares UltraShort FTSE China 25 (NYSE:
) gained 3.7 percent on more than double the average daily
turnover. FXP also broke downtrend line resistance and could make
a run to its 200-day moving average in the coming days.
The Direxion Daily Russia Bear 3X Shares (NYSE:
) gained more than six percent on more than double its average
daily volume while the Direxion Daily Emerging Markets Bear 3X
) added over three percent, also on better than double the normal
Strong volume across EDZ, FXP and RUSS is not a good sign for
Energy Weakens Name a major energy ETF and chances are it
closed in the red Wednesday. The Energy Select SPDR (NYSE:
) and the Vanguard Energy ETF (NYSE:
) were both down more than 1.6 percent while the Market Vectors
Oil Services ETF (NYSE:
) dropped 2.1 percent on volume that was about 25 percent higher
Again, just one day of price action is being referred to here,
but energy has been one of the only higher beta sectors to show
any leadership this year in what has
predominantly been a low beta rally at the sector
Cause for concern? Maybe. The ProShares UltraShort Oil &
) gained 3.3 percent on volume that was about 80 percent higher
The Golden Goose May be Cooked It has been said that gold is a
safe-haven investment. Lately, that has not been the case and it
now looks like the SPDR Gold Shares (NYSE:
) and related ETFs
are flirting with technical disaster
. GLD lost 1.1 percent Wednesday on volume that was nearly 50
percent above the daily average.
On the other hand, the PowerShares DB Gold Double Short ETN
) added 2.1 percent on volume that roughly 25 percent above
normal. Things are far worse for the miners. The Market Vectors
Gold Miners ETF (NYSE:
) plunged 4.5 percent on volume that 2.6 times above normal. The
Direxion Daily Gold Miners Bull 3X Shares (NYSE:
) tumbled nearly 14 percent to close at $20.52. Following a
reverse split, NUGT opened for trading Tuesday at just over
The Direxion Daily Gold Miners Bear 3X Shares (NYSE:
) loves all this. On better than double its average turnover,
DUST jumped 13.4 percent Wednesday.
For more on ETFs, click
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