Leveraged ETFs Trumpet The Next Recession (TBT, UPRO, FAS, GLD, SLV)

Published August 03, 2011

| 24/7 Wall St.

The media keeps pointing to a double-dip recession.  It is such a commonly used term that no one even cares that this is technically just the starting point of the next recession.  Terms do not matter other than the word recession is there.  Here are the market snapshots at 11:09 AM EST:

  • DJIA: 11,764.03 (-102.59; -0.86%)
  • NASDAQ: 2,647.57 (-21.67; -0.81%)
  • S&P500:    1,243.30 (-10.75; -0.86%)
  • 30YR-T: 3.8050% (-0.114)
  • 10YR-T: 2.5630% (-0.061)

Washington D.C. is responsible for this last wave of what probably locked the markets back into recession.  The debt and budget process actions were way too slow, were maddening to the public, and frankly gave businesses the last excuse needed to pull their hands off the buying buttons and hiring buttons.

The ProShares UltraShort 20+ Year Treasury (NYSE: TBT) hit a new 52-week low today, an extreme measure, as the Treasury yields challenged 3.80% on the 30-year and 2.50% on the 10-year.

ProShares UltraPro S&P500 (NYSE: UPRO), a 300% S&P 500 mover, has bounced a bit, but is still down over 2% at $65.55 after having traded under $64.00 briefly.  Direxion Daily Financial Bull 3X Shares (NYSE: FAS) has even briefly traded under $20.00 today before a recovery.

SPDR Gold Shares (NYSE: GLD) tracks the gold market and both hit a new high yet again. The SPDR Gold trust hit $162.86 today as gold was challenging $1,675.00 per ounce.  Even the iShares Silver Trust (NYSE: SLV) has risen back above the $40.00 death-trap line that has killed investors before.  Those shares are up 1.7% at $40.50 today.  These are feeling leveraged enough that we didn’t even dare use the leveraged metals ETFs.

Will an oversold bounce come?  It may be happening as this publishes.  The stock markets have now gone negative in 2011 and the losing streak will be nine consecutive days if today ends up in the red.  That would mark the longest losing streak in years and years for stocks.

The austerity measures will take out that much more from the economy.  The layoff waves have started all over again, GDP is anemic, Europe is trying to keep the PIIGS out of the slaughterhouse, Triple-A ratings are becoming mere token items, China and India keep slowing, austerity measures will drag, and on and on.

Now the big hope is that value buyers will step in or that a grossly oversold reading will bring on more buyers.  If you overlay the 2010 chart with the 2011 chart so far, this could end up being Financial Groundhog Day.

JON C. OGG

URL

http://www.foxbusiness.com/markets/2011/08/03/leveraged-etfs-trumpet-next-recession-tbt-upro-fas-gld-slv/