Revisiting These Lonely Bear ETFs (FAZ, DRV, TZA)

The Dow Jones Industrial Average has steadily risen approximately 14.5% from 9,985 on August 26th to a two year high of 11,434 yesterday, November 4th.  It may be natural for investors to gain confidence in the markets ability to continue moving upward.  Investors should remember that the upward move of the Dow also creates opportunities from Bear market ETFs that have quietly moved downward while investors are being swept into the markets upward momentum.

In a April 23, 2010 ETFReady.com post titled “Lonely Bears at the Bottom (FAZ, DRV, TZA)” the DJIA was above 11,100, Gold was at 1,140, the S&P 500 was above 1,200 and Oil was above 83 and the US Dollar Index was just above 81.  In April whispers of the DJIA reaching 12,000 by the end of the year began to surface while prices for Bear market ETFs were attractive based on the chart below: See the information on the Direxion Daily Financial Bear 3X Shares (NYSE:FAZ), Direxion Daily Real Estate Bear 3X Shrs (NYSE:DRV), and the Direxion Daily Small Cap Bear 3X Shares (NYSE:TZA):

Bear Market ETFs 
 
Today, the same upward pitch of the DJIA is present and the Bear market ETFs have returned to attractive levels.  (Note: A reverse split earlier this year has affected the (NYSE:DRV) and (NYSE:TZA) funds prices)

BearETFs_11052010

A couple of the major differences between April 23 and Nov 4 are:

  • The Republican Party regaining majority status in Congress
  • The Federal Reserves Quantitative Easing Plan (Buying $500 billion in Bonds)
  • Gold: 1,381
  • Oil: 86.88
  • US Dollar Index: 76

The U.S. Housing Market is still in a state of recovery, the national unemployment rate is still hovering around 10% and fears of future inflation are sprinkled in by the news media.

The idea is for investors to build a balanced portfolio.  Getting overly excited about the two month rally of the market could lead investors to overlook assets going on sale while the market moves up.

Written By Gregory S. Davis From ETF Ready

ETF Ready is produced and published by Gregory S. Davis of the Registered Investment Advisory G.Davis Capital (www.gdaviscapital.com)

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