ETF Update: Hedges Against Oil, Retail ETFs Up, ETFs and a Bullish Dollar

Hedge Against Oil's Wild Swings With New Long/Short ETFs

Is the time nigh for some ETFs that short oil and gas?

The answer seems to be mixed - while oil prices have retreated some yesterday, down to $132 a barrel, gas is continuing its forward march. The national average is now $4.06 a gallon, John Wilen for the Associated Press reports.

The decline isn't seen as a sign of a changing trend, analysts say, because oil has seen a number of sharp swings in past weeks. Instead, oil is "range trading," waiting for direction from a significant move in the dollar or a change in the supply and demand fundamentals. Most sentiment still seems to remain bullish.

In financials, Lehman Bros. (LEH) shook up its management, removing its top two executives, reports Joe Bel Bruno for the Associated Press. The news comes days after the fourth-largest investment bank in the country delivered news of a $3 billion quarterly loss. It's a clear signal that the credit crisis isn't over yet.

What's your sentiment for the sectors? It seems like for every opinion, there's an equally fervent but exactly opposite opinion.

Whichever side of the argument you're finding yourself on, ProShares and Rydex both some new additions to their line of long/short ETFs to give you a chance to capitalize. Already offered are the ProShares UltraShort Oil & Gas (DUG), as well as the UltraShort Financials (SKF).

To give investors more choices and ways to hedge volatility in both of these sectors, the new members of the lineup are:

• ProShares Short Oil & Gas (DDG)
• ProShares Ultra Oil & Gas (DIG)
• Rydex 2x S&P Select Sector Energy (REA)
• Rydex Inverse 2x S&P Select Sector Energy (REC)
• Rydex Inverse 2x S&P Select Sector Financial (RFN)
• Rydex 2x S&P Select Sector Financial (RFL)
• ProShares Short Financials (SEF)
• ProShare Ultra Financials (UYG)

In addition to the energy and financial ETFs, Rydex also launched long/short health care and technology ETFs:

• Rydex 2x S&P Select Sector Health Care (RHM)
• Rydex 2x S&P Select Sector Technology (RTG)
• Rydex Inverse 2x S&P Select Sector Health Care (RHO)
• Rydex Inverse 2x S&P Select Sector Technology (RTW)

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

That Shopping Spree Was Justified - It Helped Retail ETFs

Retail ETFs are jumping for joy at the news of an unexpected gain. So, if you were feeling a little guilty about that splurge, just tell yourself it was for the greater good.

Retail sales rose a full point in May as consumers went on spending sprees with their rebate checks, reports Joanne Morrison for Reuters. Even Wall Street wasn't that optimistic - the actual numbers were twice what had been expected.

Excluding autos, sales rose 1.2%. Excluding autos, building materials and gasoline, sales still managed a rise of 0.8%.

• SPDR S&P Retail (XRT): down 8.1% year-to-date
• Retail HOLDRs (RTH): up 0.2% year-to-date
• iShares S&P Global Consumer Discretionary (RXI): down 10.5% year-to-date
• Vanguard Consumer Discretionary (VCR): down 8.4% year-to-date

For full disclosure, some of Tom Lydon's clients own shares of RTH.

ETFs Can Harness a Bullish Dollar

After the government has indicated it's ready to start defending the dollar, recent sentiment is pointing toward bullish, and some ETFs give investors the chance to jump in.

The dollar continued its climb yesterday, sending oil prices lower, reports John Wilen for the Associated Press. The weak dollar is a major reason the price of oil is so high, because it makes it less expensive to investors overseas.

Federal Reserve Chairman Ben Bernanke indicated earlier this week that they're done cutting interest rates and, if anything, might start hiking them up again. This bodes well for the dollar. Bernanke's remarks were unusual, because he had been letting Treasury Secretary Henry Paulson answer questions about our currency, says Colin Barr for Fortune.

After his comments, the dollar rallied and indicated the the markets believe the Fed is up to the task.

It's high time our dollar saw some kind of turnaround. Since September 2007, it lost 11.6% against the euro and 7.3% against the yen, report Bo Nielsen and Ye Xie for Bloomberg.

Analysts think that more than words are going to be needed to truly turn the tide on the dollar, and think an interest rate increase could send the dollar definitively higher.

Before diving into these ETFs, though, wait until they're on solid footing and have crossed above their trend lines.

There are an increasing number of ways to capture exposure to a rising dollar, including:

• Market Vectors Double Short Euro (DRR), launched May 22
• PowerShares DB US Dollar Index Bullish (UUP), down 3.9% year-to-date

The dollar vs. the yen and euro in the last year:

 

Comments

[sbenard:]

Now, there is also a new commodity ETN that takes BOTH long and short positions in the same ETF. When I read the headline, I was interested in the article because I thought that's what this article would be about, but it wasn't. The symbol for the ETN that goes BOTH long and short is LSC. Cool!

2008 Jun 14 10:07 PM

[Kunst:]

How do you make money going long and short on the same security?

2008 Jun 15 03:48 AM