Friday, July 03, 2009

ETF Ultra Short of Small Caps, TZA, versus S&P 500

Since I have held on to my TZA stock these past 2 months, I wanted to show my readers 2 charts which compare TZA versus the S&P 500 to give readers an idea where I believe TZA will go now. From the first chart of the S&P you can see in the chart below the first few data points in the beginning of April, the Index was between 825 and 840. The S&P closed yesterday at 889. I believe the S&P will go back down to test the 840 level again and it will break below that on its way to 800 and then we will see if it goes back to its lows of 666. That's right 666, a fitting number for the 52 week low as it felt like devils work indeed.

Now looking at TZA below, which is an ETF based upon the Russell Small Cap index, but is a triple short of it, you will see it closed yesterday at $23.63 and from the chart below, assuming all Indexes will retrace relatively the same, down, then you can see TZA should reach between $40 and $45/share. This would be roughly an 80% gain. If it goes back to the 52 week lows on the Russell Small Cap index, TZA could go well above $70 to $80/share, whatever the comparable reverse split will be.

Now I know the ETF's are all scheduled for a reverse split on July 8th so the numbers will be different but the value of the change should be about the same. It is something to look forward to, during which this time will be agonizing for many who have not hedged their gains these past 3 months. It will be the House of Pain, as Jim Cramer, host of CNBC's Mad Money program, refers to difficult market losing periods. I am hoping it will bring me and some of my followers who also own any ETF Ultra Shorts, to the House of Gain.

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Blogger Minneloushe said...

I hope you are right. I've stuck with you through all of this, from an average buy of just under 31. I'm also a long-time BCON shareholder. Thank you for your continuing insights, and your comprehensive social and political attitudes. / Jerry Wechsler (New York, NY)

4:26 PM  
Blogger Charles Amico said...

Jerry, I came across this article this morning I thought you might like. It's from someone I respect:

Oh, So Now There Are No Green Shoots? 48 comments
July 03, 2009

Roger Nusbaum
Followers 632

By now you know the non-farm payrolls report came out and the job loss for June was worse than expected. Fortunately the weekly jobless claims number stunk too (small humor attempt). And of course the stock market puked down yesterday.

The tenor of the comments on CNBC seemed to be that "oh well, forget about it now," this after the occasional berating of people who were not so bullish before the June data printed. This sort of manic tone that investors are exposed to from various parts of the media has the potential to be dangerous.

I write often about panic selling and panic buying. Letting manic commentary in the media influence your thinking can precipitate panic trading. Think about the last few years from a very big picture. How bad is this really? And how much has changed in the last three months? This has been pretty bad, though not Armageddon, and not much has changed in three months. The stock market rallied a lot and that made some people feel better.

In late December I said I thought there would be a huge rally for no reason at all--it would just happen. I was obviously a couple of months early, but it happened. This was not a prediction where I went out on a limb. After markets scare the hell out of people they have violent snapback rallies - this is just how it works.

For the last few weeks, maybe longer, I have been saying I thought there would be one more run down that would scare the hell out of people. I don't think a scare the hell out them decline would take out the old low, but I don't know. This is not really a prediction where I am going out on the limb either because... say it with me... this is just how it works. The violent snap back rally, which I have also referred to as a "feel good" rally, reassures people that things are ok and then the market tanks one more time bring it to what John Hussman has called the revulsion stage. Maybe it won't happen this time, but the chances are good that it will.

There was no Armageddon or Great Depression 2.0 in the first week of March, we were not completely out of the woods in May, and there will be no Armageddon or Great Depression 2.0 if we go down to SPX 700 this summer. I think this is shaping up to what I said months ago, which was that the way out will be a stumble along the bottom.

Hopefully long time readers, and more importantly our firm's clients, will realize that my view has been steady as opposed to flip-flopping with each data point that comes along. Aside from probably being unhealthy, constant flip-flopping is more likely to be wrong.

8:12 AM  
Anonymous Anonymous said...

It's Minneloushe again, but I always forget my Google password... Thanks for the level-headed article. My long-ago teacher, one EJ Gold, called it the "Cat on the Chandelier" response. Everything is hyperventilated; on TV, even the weather. One reason I like BCON is that the management seems not to react that way. In my old age (all of 61), I am becoming more and more tired of what is either slick or "clever." Not that Jane Austen lacks cleverness; but it is not her center of gravity. Her wit is a tool, consciousness is her object. But I digress ...
Do you like Classical music ? If so, check out Paul Makanowitzky's rendions (with Noel Lee on piano) of Beethoven's Violin Sonatas (Doremi). I worked for years to find someone to could get these reissued; they are by far the best performances of these pieces. And if you listen, and like, then whenever you find yourself in NYC, please let me know ( Meanwhile, thanks for reading this and keep those cards and letters coming. / jw

1:31 PM  

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