By The ETF Professor
With Friday's declines, major U.S. indices are close to giving back all of their post-Federal Reserve gains that were accrued Wednesday.
Weakness in U.S. stocks after the Fed-induced, no tapering surge is not surprising. History shows that equities often hit a rough patch in the weeks immediately following a big Fed day and Wednesday certainly qualifies as that.
Possibly making the near-term forecast for stocks all the more gloomy is October is right around the corner and the tenth month of the year is mediocre at best for the bulls. It is actually the worst month for the Russell 2000 and the fourth-worst month for the Nasdaq Composite. With October near and enthusiasm for the no tapering rally all but gone, traders may want to consider the following ETFs.
Direxion Daily Gold Miners Bear 3X Shares (NYSEARCA:DUST)
DUST has been a champion for much of this year as gold's bull market appears to be ending. Yes, the yellow metal got some help from the Fed Wednesday, but in indication of just how week the miners are, DUST is following up a strong showing Thursday with a Friday gain of almost 19 percent at this writing.
Direxion Daily Energy Bear 3X Shares (NYSEARCA:ERY)
Talk about a post-Fed dud: The U.S. Oil Fund (NYSE: USO) is on pace to finish the week with a loss of about 1.5 percent. Bolstering the case for the Direxion Daily Energy Bear 3X Shares is the fact that September is usually a good time to short oil stocks, but that has not been the case this month as the Energy Select Sector SPDR (NYSEARCA:XLE) was up 3.6 percent heading into Friday's trading session.
With Syria concerns all but extinct for the moment, a disappointing no tapering performance and seasonal trends at play, the energy sector is not a screaming buy at the moment. Perhaps the Direxion Daily Energy Bear 3X Shares is for adventurous traders.
There is risk with SKF because it is possible that large-cap banks will respond positively to falling interest rates, if that scenario occurs. However, there are reasons to believe SKF can go higher in the near-term. The fund is the double-leveraged, bearish answer to the iShares U.S. Financials ETF (NYSEARCA:IYF).
IYF has a six percent weight to J.P. Morgan Chase (NYSE:JPM), a company that generates more bad news than good these days. Additionally, IYF's exposure to regional banks and life insurance providers, albeit slight, is not a favorable trait if 10-year Treasury yields do decline in earnest.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.