Astounding Volume in 3x Financial ETF FAS May Signal Turnaround

| About: Direxion Daily (FAS)

Yesterday, the Dimension 3X Financial Bull ETF (NYSE:FAS) traded nearly 300M shares. That’s pretty amazing for an instrument that didn’t even exist a year ago. Forgive the style drift — I know it's hardly a microcap. Though net assets are down to $320M (per Yahoo!), the ETF attempts to replicate on a leveraged basis the daily movements of much bigger stocks.

That said, I don’t think this market will turn until the FAS — which Ron Sen aptly named the crack cocaine of financial stocks — heads north. I’m a buyer here and believe that a short-term reprieve will come this week or next.

This is just an attempt to get in front of a snapback rally, not an endorsement of lasting recovery at our nation’s ailing banks. There are three potential catalysts:

1. the severity of the oversold condition;

2. this Thursday’s hearing on mark-to-markets, the lifting of which many think will aid bank stocks; and

3. options expiration.

The first catalyst (the oversold condition) is most compelling. When a stock trades at such massive volume and can’t go down even in the face of negative prints on the major indices, there is a pretty good chance the sellers are ready for a break. That’s my bet anyways, and we’ll find out as the week progresses whether it works.

Click to enlarge



About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here