ETF Swing Trading & ETF Investing Online

My Last Post

noreply@blogger.com (ETF Updater) — Fri, 04 Jan 2008 21:33:00 +0000

I accepted a position as a trader for a mutual fund company so I will no longer be posting to this blog.

My colleagues at the ETF Updater will continue to manage the informational service and are extremely are familiar the ETF trading and ETF investing methodologies.

My colleagues will be establishing two additional separate blogs.

One blog focuses on Swing Trading ETFs (http://swingtradingetfs.blogspot.com/) and the other blog focuses on ETFs and investing strategies (http://etfinvest.blogspot.com/).

Swing Trading ETFs (http://swingtradingetfs.blogspot.com/ )

- Educates readers about swing trading

-Provides ETFs exhibiting buy and short sell swing trading patterns ready to make a high probability move

-Has an educational book to teach individuals and experienced traders the details about how I swing traded ETFs.

ETF Investing – The Best ETFs and the Worst ETFs (http://etfinvest.blogspot.com/ )

Educates Investors about different ETFs (Exchange Traded Funds) and provides a subscription service for investors seeking investment strategies and ideas. The informational service takes a portfolio approach along with hedging strategies to limit adverse moves in the market.

I've enjoyed posting and interacting with you!

All the best,

Michael Matousek, CMT

Weekly Economic Recap

noreply@blogger.com (ETF Updater) — Sun, 30 Dec 2007 03:16:00 +0000

It was a Holiday shortened week. On Thursday, the November Durable Goods came in lower at 0.1% versus 2%. Then on Friday, the big news was the dissapointing twelve-month low for New Home Sales in November at 647k versus 717k, a drop of 9% from the previous month.

The major indices finished the week lower:
S&P500 -0.40%
Dow Jones -0.63%
Nasdaq -0.65%
Russell 2000 -1.76%

The US Dollar closed lower at 76.218 and gold finished the week at $842.70, up $27.30 on the lower dollar and the tragic events in Pakistan.

To look at next week's economic calendar click here.

Amaury

Commodity ETFs - New Investing ETN

noreply@blogger.com (ETF Updater) — Fri, 28 Dec 2007 13:44:00 +0000

Let me start by saying I am biased: I love commodities.

I own several natural resources funds, gold and silver companies, and GLD. I love the fundamentals and the diversification they offer, so I am always looking for new ways to get exposure. And I believe I just found it: The Rogers International Commodity Index, (symbol, RJI, http://www.elementsetn.com/ProductsPage.aspx).

This new index is comprised of 36 commodity futures contracts: 44% energy, 34% agriculture, and 22% metals. Keep in mind, RJI is an Exchange-Traded-Note, meaning, it is a debt security with market and issuer risks, it matures in 2022 and is traded on the American Stock Exchange.

Through one security, I can gain exposure to all commodities and reduce my portfolio correlation and risk profile.

I urge you to visit the website in order to find out more and to do your own due diligence before investing!

Amaury
Contributing Author, ETF Updater
http://etfupdater.com

Best Days to Invest

noreply@blogger.com (ETF Updater) — Thu, 27 Dec 2007 18:24:00 +0000

For the past 10 years research suggests Mondays and Tuesdays are the most consistently bullish days of the week for the Dow Jones Industrial Average and Thursday and Friday are the most bearish.

How can market participants take advantage of this phenomenon?

To increase the probability of success, try to time your trading methodology so it corresponds with the bullish/bearish day phenomenon. Additionally, the study researched large cap stocks, so I would keep a list of the large cap ETFs I’m interested in handy.

For starters here is a few:

Symbol - Description

DVY - iShares DJ Select Dividend Index
IVE - iShares S&P 500/Barra Value
IWD - iShares Russell 1000 Value Index
IWF - iShares Russell 1000 Growth
DIA - Diamonds Trust, Series 1
IVV - iShares S&P 500 Index Trust
IVW - iShares S&P 500/Barra Growth
IWB - iShares Russell 1000 Index Trust
OEF - iShares S&P 100 Index Fund
PWB - Power Shares Dynamic Large Cap Growth
SPY - S&P Depository Receipts

This doesn’t mean every Thursday & Friday are good days to enter positions at favorable prices, but knowing a little extra statistical data can assist Portfolio Managers, Swing Traders and Investors manage risk better and increase their P&L.

Keep in mind, this is not investment advice and should be used for educational and informational purposes only. The bullish/bearish phenomenon, as with any trend can change at any time.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

We have a new format for our ETF Trading Services.

noreply@blogger.com (ETF Updater) — Thu, 27 Dec 2007 14:40:00 +0000

Good Morning:

We think you will enjoy our new formats.

Swing Trading Playbook - Subscribers Only
Sample - http://etfupdate.blogspot.com/

ETF Updater "Lite" Free Swing Trade Patterns
http://swingtradingetfs.blogspot.com/

ETF Investor - Information for the ETF Investor
http://etfinvest.blogspot.com/

Be sure to save each one as a favorite for easy access!

Michael Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com

This Week's Economic Data

noreply@blogger.com (ETF Updater) — Sat, 22 Dec 2007 15:43:00 +0000

This was a light week for economic data. The Empire (NY) Manufacturing Index for December came in lower at 10.3 versus 20.0, the Philly Index also disappointed at -5.7 versus 6.0 later on the week and the now irrelevant final revision for 3Q GDP was reported, in-line, at 4.9%.

Investors received a mild positive on Friday, with Personal Spending for November higher than expected at 1.1% versus 0.7% and the Core PCE Deflator was also higher at 2.2% versus 2% year-over-year. Don't tell the Fed and Santa!

The major indices finished the week higher:

Russell 2000 +4.17%
Nasdaq +2.13%
S&P500 +1.13%
Dow Jones +0.83%

The US Dollar finished slightly higher at 77.72 and gold finished the week at $815.40, up $17.40 on renewed inflation worries as oil rallied up $2.06 on the week.

Check out next week's calendar at:
http://www.bloomberg.com/markets/ecalendar/index.html

ETF Swing Trading and Investing – Capitalize on the 2 Day Down Phenomenon

noreply@blogger.com (ETF Updater) — Fri, 21 Dec 2007 19:07:00 +0000

Helping Swing Traders, Investors and Institutional Market Participants Increase Profitability

Past research suggests market participants can increase there probability of determining a short term turning point by tracking the performance of the Dow Jones Industrial Average on Fridays and the following Monday.

Past history shows if the Dow had a down Friday and a down Monday there is a negative bias in the market and frequently corresponds to some short or intermediate term market tops.

Over the past twelve years this phenomenon occurs on average about ten times per year and has an average decline of 5.5%. If the market is in a downtrend the average decline is amost double!

Additionally, it seems, if the pattern develops after an extended downward move a short term bottom may be in the works.

How can market participants capitalize?

Learn more about trading and investing by signing up for our free educational trading material at http://www.etfupdater.com/requestinformation.php.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading ETFs with Bullish & Bearish Statistical Inferences

noreply@blogger.com (ETF Updater) — Fri, 21 Dec 2007 15:43:00 +0000

For the past 10 years statistical research suggests Mondays and Tuesdays are the most consistently bullish days of the week for the Dow Jones Industrial Average and Thursday and Friday are the most bearish.

How can market participants take advantage of this phenomenon?

To increase the probability of success, try to time your trading methodology so it corresponds with the bullish/bearish day phenomenon. Now, this does not mean every Thursday & Friday are good days to enter positions at favorable prices, but knowing a little extra statistical data can assist Portfolio Managers, Swing Traders and Investors manage risk better and increase the bottom line.

Keep in mind, this is not investment advice and should be used for educational and informational purposes only. The bullish/bearish phenomenon, as with any trend can change at any time.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Ways to Capitalize from the ETF Phenomenon

noreply@blogger.com (ETF Updater) — Tue, 18 Dec 2007 04:04:00 +0000

As ETFs have become more and more popular, I wanted to bring to our readers' attention some indirect ways to invest in this growing trend.

Think about this; every time you buy or sell an ETF, there is a distributor, custodian, commission, and exchange that benefit from the transaction. While the following stocks have their own investment risks, I hope the symbols below can provide you with a starting point for investment ideas and profits:

This is not a solicitation or offer to purchase any securities. It is for informational purposes only.

AMTD
ETFC
SCHW
BCS
DB
MER
MS
TROW
WSDT
BK
STT
SEIC
GFIG
NYX
NDAQ
MF

Amaury
Contributing Author, ETF Updater
http://etfupdater.com/

Swing Trading and Day Trading ETFs – Large Position Sizes Are Not Absolutely Necessary

noreply@blogger.com (ETF Updater) — Tue, 18 Dec 2007 03:08:00 +0000

Contrary to popular belief you don’t need to trade big share sizes to make a fair amount of money in the market.

In addition to trading for a living, I manage subscription based educational service called the Swing Trade Playbook. The idea behind the Playbook and this blog is to educate individuals about ETFs, trading, swing trading and day trading.

Every weekday night my Swing Trade Playbook outlines my trading plan for the next trading day. By doing this, I allow individuals to “peek over my shoulder” and see tomorrow's trading plan today!

Today’s lesson, you don’t need to trade large size to earn a good living swing trading. The image below shows the positions my Swing Trade Playbook shared with subscribers about one week ago. As you can see the largest position is only 1,136 shares and if you were to enter the positions your unrealized P&L would be pretty close to $21,000 with an initial risk of approximately $7,000 (a 3 to 1 reward to risk ratio).

I wanted to show this since a potential subscriber emailed and asked how I can make any money trading small share sizes.

If you would like to learn more about my Swing Trade Playbook go to my website http://etfupdater.com.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading the Best and Worst ETFs

noreply@blogger.com (ETF Updater) — Mon, 17 Dec 2007 16:36:00 +0000

This weekend an individual wanted to learn how we trade ETFs.

I’ll start by saying there is no one Holy Grail in trading and to be successful traders only need to understand a couple of strategies.

The core strategy behind my method is to purchase ETFs during pullbacks and short ETFs during rallies. I feel my method offers less risk than traders buying breakouts and selling break downs since the majority of the trades are entered during either “oversold” or “overbought” conditions.

As many of my subscribers noticed I don’t have many breakout plays in my ETF Swing Trade Playbook and here is why:

Most experienced market participants have heard the phrase, 'beginners buy breakouts, professionals buy pullbacks".

Contrary to the “inexperienced” traders’ belief, the majority of breakouts are unsuccessful! Sure, it is easy to look at a chart and identify the best breakout points that happened in the past, but what most inexperienced traders fail to notice is how many breakouts fail – I assume this is why most inexperienced traders are unsuccessful.

Breakouts, the successful ones, don’t happen as often as people think. Realistically, there are only a few times each year an individual sector actually has the opportunity for a good breakout to exist.

Breakouts have greater risk. If a trader believes in trends, support and resistance levels the actual price in which the trend is broken, the stop loss price, is much farther away from the entry price on breakout trades. Therefore, to give the trade the opportunity to "work" the “wiggle” or stop loss level has to be larger than the “wiggle” for pullback strategies. This means greater risk with each trade - why would any astute market participant want to take on additional and unnecessary risk?

The majority of newsletters generally focus on breakouts, my Swing Trade Playbook focuses on pullbacks and rallies. Subscribing to my informational service not only assists subscribers diversification of trade discovery tools, but subscribers get see the trades I anticipate doing the day before I attempt the trade. This included my original and uncommon trading methodologies.

Sure, I do trade some breakouts, but they are not my core strategy since, technical analysis research has shown breakout type strategies fail more often than succeed. Generally, I wait for the breakout to happen, confirm itself and then I buy the pullback.

I have an educational book called Swing Trade Fundamentals it details the how and why concerning finding trades, determine the correct amount to shares to purchase, determining entry points, exit points and much more.

If you would like to learn more about swing trading, day trading and investing feel free to sign up for our free weekly swing trading educational newsletter at http://etfupdater.com/ or click here.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Best & Worst ETFs

noreply@blogger.com (ETF Updater) — Mon, 17 Dec 2007 04:04:00 +0000

Best Performing ETFs for Friday December 14, 2007

Energy, specifically, clean energy and commodities (Gold) were the only two sector ETFs I track that were positive on the day.

PBW PwrShr WilderHill Clean Energy 1.55%
GLD StreetTRACKS Gold Trust 0.15%

Worst Performing ETFs for Friday December 14, 2007

It seems the heavy selling was in the real estate and banking ETFs.

KBE SPDR Series KBW Bank -4.45%
ICF iShares Cohen & Steers Rlty Ma -3.62%
RWX SPDR DJ Wilshire Intl Real Est -3.43%
RWR SPDR DJ Wilshire REIT -2.93%
VNQ Vanguard REIT ETF -2.89%

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Traders' Market Update

noreply@blogger.com (ETF Updater) — Sat, 15 Dec 2007 20:20:00 +0000

The BIG story of the week was the FOMC meeting on Tuesday...and the market's disappointment in 'only' 25 bps cuts on the Fed and discount rates. The Fed then surprised investors the next morning, in a coordinated plan with other global central banks, by injecting up to $40 billion in reserves into the financial markets in order to improve liquidity.

November PPI came in higher at 3.2% versus 1.5% (core at 0.4% versus 0.2%) on Thursday, and November CPI at 0.8% versus 0.6% (core at 0.3% versus 0.2%) on Friday. A better than expected Advanced Retail Sales (1.2% versus 0.6% expected in November) failed to impress investors, especially as reports that online sales for November and December are running below the 26% pace of a year earlier.

The major indices finished the week lower:
Dow Jones -2.10%
S&P500 -2.44%
Nasdaq -2.60%
Russell 2000 -4.02%

The US Dollar rallied 1.5% as investors pared down expectations for further rate cuts on the back of the biggest increase in consumer expectations in two years. Gold finished the week at $798, down $2.20.

Check out next week's calendar at:
http://www.bloomberg.com/markets/ecalendar/index.html

Amaury
Contributing Author, ETF Updater
http://etfupdater.com/

ETF Swing Trading - Good or Bad? Depends Which Side of the Market You’re On!

noreply@blogger.com (ETF Updater) — Fri, 14 Dec 2007 21:15:00 +0000

The ETF Sector Rotation Strategy (our strategy for longer term investors) lost ground today, but the positions are still in positive territory.

The Swing Trading Playbook has been hitting it out of the park all week. We had very few trading signals since the positions entered earlier in the week are working great. The Playbook is up about 4.5% for the week and holding a few unrealized gains over the weekend and into next week.

It looks like Monday may be the time to hedge the portfolio or start ringing the register on few positions.

Here is a screen shot of the open positions for the Swing Trade Playbook. As you can see, huge positions are not necessary to make money swing trading. The key this week was keeping the losses small and letting the winners run.

To learn more about how you can benefit from us visit http://etfupdater.com/.

Have a good weekend!

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

ETF - Professional Technical Analysis and Money Management Organizations

noreply@blogger.com (ETF Updater) — Fri, 14 Dec 2007 04:53:00 +0000

I believe, to stay on top of their game, money managers must constantly evaluate new market concepts, revisit old trading journals and network with their peers.

To accomplish this task, I belong to a few professional organizations. One of which is the Market Technicians Association (http://mta.org/) and I joined for a few reasons:

1. To learn more about technical analysis to improve my personal trading
2. To meet other professional Market Technicians
3. To help promote the use of Technical Analysis

To Learn more about the MTA click here and to learn more about what a market technician does click here.

Another organization I belong to is the National Association of Active Investment Managers (NAAIM) to visit the organizations website click here.

Each organization has a different focus, but together, they combine the knowledge, insight and camaraderie I feel a money manager needs to succeed.

If you have any questions or would like my opinion about how you can benefit, feel free to contact me. For our contact information click here.

Michael Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

ETF Swing Trades - Swing Trading Playbook

noreply@blogger.com (ETF Updater) — Thu, 13 Dec 2007 21:23:00 +0000

Contrary to a lot of individual’s beliefs, traders using a swing trading approach do not need to make trades everyday to be successful.

For example, the image below shows the ETF symbols that triggered a possible short sell signal (we emailed this list to subscribers to the day before a swing trade signal could be generated). If you are following the markets and our posts closely, today was the first time any of the ETFs had a net positive day since the signal was generated. This is good, since the ETF Swing Trade Playbook showed these as a short sell opportunity. That means if they go down we were correct in our directional bias.

Here are the ETFs that didn't get stoped out since the "playbook" was issued on December 10, 2007.

If you want to know what ETFs and swing trades I'm planning for the next trading day visit us at http://etfupdater.com/. We have a trial offer for $19.99 until the end of the year, then it goes to $49.99 per month.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Investor Sentiment

noreply@blogger.com (ETF Updater) — Wed, 12 Dec 2007 18:56:00 +0000

Investor Sentiment is important for traders when determining a directional bias for their swing trades. Remember, swing trading consists of trades generally last more than a day and can continue for a few weeks if the trader’s bias remains constant.

It is even quite common for institutional traders to use the bias generated from investor sentiment analysis to determine the type of scalping trades they make. For instance, if the investor sentiment bias is bearish, the traders generally trade the market on intraday signals from the short side.

Investor sentiment isn’t discussed much in the mainstream media, but it is an important tool in determining market bias. I’m not sure, but maybe it’s not mentioned because it doesn’t have “sizzle” or is as “black and white” as a moving average. Or, perhaps, it’s due to the fact that it is a “smart money” indicator and the “dumb money” wants avoid learning how their emotions fueled the huge turnaround they recently missed. Whatever the reason, the less people educated about market psychology the better the market becomes for the informed trader.

“Smart Money” or institutional investors do the difficult work and look deep at the internals of the market while everyone else waits for the media to explain it. Since it is difficult to find the CBOE VIX or the Put/Call ratio from one source, I need to dig through multiple web sites to determine the current readings of each one.

Here is a site that has a few of the indicators I mentioned http://www.schaeffersresearch.com/.

Robert J. Ogilvie
CIO and Head Trader
http://www.skyboxtrading.com/

Commodity ETFs – Should They be in Your Portfolio

noreply@blogger.com (ETF Updater) — Wed, 12 Dec 2007 12:57:00 +0000

My friend Mike asked me a few weeks ago to contribute his blog with my thoughts on commodities, especially the precious metals since I truly believe investors can benefit from some exposure to commodities as an asset class in a well diversified portfolio.

There have been many studies and research projects about how some allocation to commodities will increase your return and lower your risk over the long term. How much depends on one's risk and comfort level. 5-10% may be more than enough for most, while most aggressive investors will be comfortable with 40-50%. Such ETFs as GLD, SLV, CEF, GDX and others have made it relatively easy for an individual to get exposure. Sure, you can buy a resources mutual fund (but why pay the managers above average fees) or individual mining companies directly (but why worry about operational risk, management risk, currency risk, geopolitical risk, environmental risk) when you can get exposure to the asset class through ETFs.

When I first started trading metals in the mid 1990s, I had to buy gold coins at the local dealer, but now the with the ease of owning commodity ETFs along with the diversification they offer, any investor would be foolish not to own commodity-related ETFs.

If you are new to investing, start by accumulating on a pullback and build a position over time (but be wary of your commission costs) and rebalance at least yearly, if not quarterly, depending on your risk tolerance. This world is too global and offers too much opportunity not to have some exposure.

Amaury
Contributing Author, ETF Updater
http://etfupdater.com

Today's ETF Action Action and Yesterday's Playbook

noreply@blogger.com (ETF Updater) — Tue, 11 Dec 2007 21:41:00 +0000

Here is an excerpt from my swing trade playbook I sent out today. If you are interested in learning gaining access visit http://etfupdater.com/ :

This was a great day for subscribers that get a glimpse of my trading plan!

As you probably already learned the fed cut rates by .25 basis points. In my opinion, I thought they should have cut by .50 basis points and from the market’s response, I think the majority of market participants felt the same way.

As many of you know, for the past few days I’ve been posting how the market has been rising on low volume (remember low volume moves to the upside are suspect), that I’m keeping the portfolio light and how there was more risk to the downside than the upside.

As I filter through the ETFs, there are no setups for tomorrow’s playbook because of today big move, so I thought I would send a sample yesterdays playbook and how much each trade is in the money.

Tomorrow will be a day to sit on my hands, let the positions work and mitigate any risk.

The image to the right is what I sent to subscribers last night. It shows the direction I attempt to play, the entry price that the ETF has to trade at to trigger an entry signal, the average volatility of the ETF and how many shares I anticipate trading.

The image below shows the trades that were triggered and how many points they are “in the money” (maximum for the day). Basically, you can multiply the “In Money” column by how many shares you would have purchased. Click on the image to enlarge it.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading and Day Trading, Unknown and Overlooked Differences

noreply@blogger.com (ETF Updater) — Mon, 10 Dec 2007 15:23:00 +0000

I've been asked numerous times, what do Swing Traders do and how are they different than Day traders. First, I should start off by saying there isn't one best way to trade, but it seems almost everyone has an opinion about which way they feel is best.

In the past I would either day trade or swing traded exclusively, but now 90% of my trades are swing trades and the other 10% are day trades. My experience as taught me that combining the two styles offers me the opportunity to capitalize on different market opportunities other traders may pass up.

There basic differences between day trading and swing trading are:

o Time in Trade
o Risks
o Margin Advantages

I've been asked numerous times, what do Swing Traders do and how are they different than Day traders. First, I should start off by saying there isn't one best way to trade, but it seems almost everyone has an opinion about which way they feel is best.

In the past I would either day trade or swing traded exclusively, but now 90% of my trades are swing trades and the other 10% are day trades. My experience as taught me that combining the two styles offers me the opportunity to capitalize on different market opportunities other traders may pass up.

There basic differences between day trading and swing trading are:

o Holding Periods
o Risks
o Margin Advantages

Time in Trade

Swing Traders generally hold positions for days or weeks and the holding period is generally determined from the stocks trend as opposed to the market's hours for day trades.
Day traders generally start and end the day without any positions in the account. In doing so, the risk of holding overnight positions that open adversely to the trader is mitigated, which is true, but there are a few other risks many day traders don't think about.

Many people think day trading is less risky since they do not hold positions overnight. In my opinion, this is far from reality since most of the day trading proponents never talk about "commission risk".

Commission Risk
The risk that the cost of commissions can significantly impact the traders account. I've been in this business quite some time and have seen individuals gross $250,000 per year trading and pay $300,000 in commissions producing a net loss of $50,000 for the year. So, if you are going to day trade, keep in mind the risk least talked about, COMMISSION
RISK.

Opportunity Risk

The risk that a better opportunity may present itself after a decision has been made. Traders need to realize if they are going to swing trade, which generally requires more capital than day trading they are more susceptible to opportunity cost. I can find quite a few swing trades per day, but since capital is limited I need to reduce my opportunity risk by screening all possible swing trades for the best opportunities.

Margin (What is Margin)

Day trading does give some traders an advantage, buying power. If an account qualifies to be a day trading account the broker dealer may offer the trader 4 to 1 intraday leverage instead of the industry norm of 2 to 1. Keep in mind, depending on the day traders experience and profitability this can help traders produce greater returns or losses.

Feel free to send me an email if you have any questions.

Until next time take care and trade smart.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com

Why the Media Has Short Squeezes Wrong.

noreply@blogger.com (ETF Updater) — Sun, 09 Dec 2007 04:56:00 +0000

Lately, the media has been talking up a storm about stocks with a high short interest proposing hedge funds are in trouble and need to cover. I find this a bit far from reality since most funds use capital and derivatives more efficiently than the average person thinks.

They, the media, or the so called professional being interviewed, seem to think any stock with a relatively high short interest and a trading day with a high positive net change is a short squeeze. Sometimes this is the case, but not always. Especially for stocks that are optionable.

You see, if a market participant is short an optionable stock and the stock starts to rally, to hedge themselves or, get delta neutral the participant can purchase an option instead of covering the stock in the open market. In doing so, the market participant does not add fuel to the current rally of their short position. Therefore, they can still hold the stock short and not lose any capital.

The theory of the media’s short covering rallies can be valid if the security in question is not optionable. In this situation, the hedge fund does not have derivatives to mitigate risk and to stop the trade from depreciating in value the fund will need to cover the stock in the open market - adding fuel to the rally in question.

Unfortunately, the stocks they were talking about were optionable so I would be suspect about calling that particular rally a short squeeze.

If I were to play the short interest / short squeeze trading game for either a daytrade or swing trade before I can make an investment decision I would need to the following data points increase the probability of a making a wise decision.

1st Gather the data for stocks with the highest short interest and days to cover ratios
2nd Filter out the stocks that are not optionable (this increases transparency)
3rd Look at the largest holders of the each stock and determine
Are solid mutual funds with deep pockets and good returns on the year?
Are the large holders of the stocks in question individuals or other hedge funds?

Take care and happy trading.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://ETFUpdater.com

ETFs the “New Stocks”

noreply@blogger.com (ETF Updater) — Thu, 06 Dec 2007 16:19:00 +0000

To be successful market participants must always strive to keep learning, even participants such as myself. Because of this, I found a new product to trade and they are fast becoming my preferred trading and investment vehicles.

ETFs are a derivative (don’t let that word scare you) of a basket of stocks. They can be designed to track nearly any group of stocks offering investors and traders quick and easy exposure to a specific market, sector or sub sector of the market. They are quickly becoming my trading vehicle of choice since they are less volatile than individual stocks, are not as prone to single company stock risk and liquidity is not an issue (even with ETFs that trade less than one hundred thousand shares per day).

I started trading ETFs, Exchange Traded Funds, around 1999. Over the next few years the variety of ETFs grew considerably. For example, the first ETFs to really catch the public’s eye were “main stream” ETFs were mostly index tracking products for the Nasdaq 100 (QQQQ), S&P500 (SPY) and the Dow Jones Industrial (DIA) indexes. Now the makers of the ETFs even make ETFs for special strategies.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

ETF Ideas GLD, GDX & UUP

noreply@blogger.com (ETF Updater) — Thu, 06 Dec 2007 13:24:00 +0000

The US Dollar (measured through the DXY index) bounced from 74.484 on 11/23/07 to 76.413 on 12/05/07 on signs of resilience in the labor market and US economy. I believe it can extend those gains at least through next week and test 78, especially if we get 'good' unemployment data on Friday.

As such, an investor can buy UUP or short GLD and GDX for that trade. GLD topped at $83.63 on 11/08/07 and has hit two lower highs since, on 11/26 and 12/04- failed to recapture the $80 level. Support comes in at $76.50 and $75. GDX needs to hold $45.

Amaury
Contributing Author, ETF Updater
http://etfupdater.com

ETF Swing Trading - Stop Losses and Exits

noreply@blogger.com (ETF Updater) — Wed, 05 Dec 2007 22:10:00 +0000

It was bound to happen, the market had yet another powerful rally, yet the volume was about 10% less than the average volume. As I said in yesterday’s playbook “generally, when I start to see this many sectors setting up there is a high probability for a bounce, so protect your existing positions”.

The majority of the ETFs I shorted last week and on Monday of this week were either exited with small profits or stopped out with small losses. I still hold a few shorts. All in all, we are up slightly, but it pales in comparison to the amount of unrealized gains we had at the end of yesterday.

For the readers new to swing trading, this is not uncommon and it is a consequence of actively trading. Although, I would much rather be stopped out with small losses than be the market participant holding sitting on large losing trades.

Keep in mind, to make a substantial amount of money each month we need to keep the losses small and let the profitable trades mature. Out of the twenty trading days each month if we can flat fifteen and have five good days we can do quite well.

The US Health Care Sector ETF (symbol, IYH) was triggered as a long entry. It closed in the upper percentile of its trading range and looks like it may have some additional upside tomorrow. Followers of my Swing Trading Playbook should have had about $.27 cents profit in it during the day today.

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Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

GDX & GLD ETF Update - Gold Miners and Gold

noreply@blogger.com (ETF Updater) — Wed, 05 Dec 2007 16:52:00 +0000

I would like to introduce a friend and contributing author, Amaury.

Amaury is a personal friend and head trader at an investment management firm. He likes to focus on the commodity sectors within the markets, but more specifically gold and gold mining stocks.

Here is his latest insight:

The market weakness and uncertainty over the last month has created some interesting opportunities in the resources sector, especially in the Canadian junior sector. Those stocks have suffered from tax loss selling, project disappointments (i.e.: NG and the Galore Creek project), and risk-aversion selling from investors preferring large cap, less volatile names or cash. While there are over 3,000 juniors, I really like selling my GLD over $80 and using that cash to add or buy a few beaten down juniors. Of course, stick with the 'best' names- strong management team, good balance sheet, adequate cash, and advanced projects (gold-silver-copper projects in Mexico are my favorite). The fundamentals remain strong for gold and other metals, but the best trade I see right now is to look for companies that are unfairly trading at new lows and hold them over the next 12 months. Investors that can ride the volatility will be better rewarded than owing GLD outright.

Newmont (NEM), which makes up 10% of Gold Miners ETF (GDX), has agreed to sell its royalty assets and other non-core investments to Franco Nevada (FNV on Toronto) a few days ago. I like selling NEM over $50 and using that cash to buy smaller US and Canadian names that have advanced gold exploration projects. I feel this transaction opens the door for an interesting m&a period over the next 12 months.

Amaury
Contributing Author, ETF Updater
http://etfupdater.com/