by Sam Collins 10/09/08
ProShares UltraShort Dow 30 (DXD) -- This Exchange-Traded Fund (ETF) seeks daily investment results that correspond to the inverse of the daily performance of the Dow Jones Industrial Average Index (DJI).
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The fund normally invests 80% of its assets in financial instruments with economic characteristics that should be inverse to those of the index.
In the past six months, the Trade of the Day has referred to the DXD as a way for traders to grab some profits in down markets, and those trades have usually been successful.
On Sept. 3, with the DXD at $61, we said, "Now the DXD is again in a buying range and yesterday this ETF flashed a buy signal from our internal indicator -- the Collins Bollinger Reversal (CBR)."
Since then, the Dow has suffered a collapse and the DXD has run from under $60 to over $80.
A further breakdown in the Dow could propel this contra-fund to new highs. But beware, this is a very volatile performer; stocks have fallen for six successive days and are due for a rally.
Only buy this "ultra-short" fund after a market rally and place stops on it as you would with any short sale. But with panic selling driving prices of the Dow lower each day this speculative ETF could run to more than $100.
But if you enter, recognize the risk and use a stop-loss order to protect yourself.Get Sam Collins' Daily Trader's Alert e-mailed straight to your inbox each morning before the opening bell absolutely FREE!
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Sam Collins can be reached directly at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.
FAST is now consolidating and recently flashed a buy signal from our internal indicator.
Options Expiration Adds Volatility
The opening looks to be higher but today is options expiration day, and anything could happen.
Chances are high stocks will sell off further, but be alert for a dead-cat bounce after such a dramatic breakdown.
Traders and longer-term investors should sell any new positions at the first opportunity and short ETFs on a temporary recovery in the market.
CAT, the blue-chip of its industry, is the first to attract attention when it's time to dress up a portfolio.
