LitheInvestments'  Instablog

Staying Neutral - More important than ever

Can you see the greed that's brewing in the markets. EVERYONE is looking for the quick buck (and the quick loss) with these leveraged ETFs. Yes they worked well for the CNBC Million Dollar Portfolio contest but this is live real money. These ETFs are a huge double edged sword and if the CFTC and trading authorities aren't diligent there would be a heavily liquid 6x ETF, 10x ETF etc.

How do you want to play the market? Are you looking to gamble or are you ready to do some research and wait for those high probability setups to come around. Stay neutral and don't ignore indicators. Make sure you have several reasons to get into a position and not just a 'nudge' about the market.

Walmart's 52 Week High Justified? Just looking at the charts a low risk short looks like a good play for (WMT) stock which has risen close to it's all time high touched once in 1999. WMT has a dominant presence in America's grocery sector and a growing one abroad. For those who like avoiding risk it's hard to imagine WMT going past $72, insuring single digit % losses if you were to buy your short sales back below that point. For swing traders that are patient WMT looks like a nice technical set up to short over the coming weeks.

FAS TNA TZA and FAZ - Useful leverage or portfolio gambling? These are 3x leverage portfolio market ETFs that have become the hot pick by many retail traders for their portfolios. They do look enticing with upwards of 5% moves many days in these highly leveraged ETFs. Are these portfolio gambling?

Imo, if you're a younger trader and can find a higher probability setup these ETFs can be a great resource. But if you're an established larger retail account and would like to limit risk these stocks are a huge gamble with unnecessary risk. If your yearly goal is 30% or less in annual returns why would you want to trade a leveraged ETF that moves generally more than 5% in value every day? Additionally the performance in both seem a little off, both FAS and FAZ are down from where they were 3 months ago. Aren't these supposed to be direct inverses of each other? If you're a young day trader go for it, but for swing traders and older traders looking to avoid risk these leveraged ETFs put your account at unnecessary risks.