THE ONLY STOCK FUNDS GOING UP ARE BEAR FUNDS -- THE VIX IS ALSO RISING -- THE DOLLAR CONTINUES TO RISE ON SAFE HAVEN BUYING -- RUSSELL 2000 SMALL CAP INDEX BREAKS NOVEMBER LOW -- THE NASDAQ MAY BE NEXT -- TREASURY BONDS BOUNCE
INVERSE ETFS ARE RISING ... Rather than showing you pictures of falling stock indexes, I'm going to show you charts of stock indexes that are rising. That would of course be inverse (or bear) ETFs. These inverse funds are designed to trade in the opposite direction of their respective benchmarks. The strongest of the group is the ProShares Short Dow 30 Fund (DOG) which has already exceeded its fourth quarter highs (Chart 1). Right behind it is the ProShares Short S&P 500 Fund (SH) which is nearing a test of its November high (Chart 2). Chart 3 shows the Short Russell 2000 Fund (RWM) trading at a three-month high. Chart 4 plots the ProShares Ultra Short QQQ (QID) which is based on the Nasdaq 100. Chart 4 is an "ultra" fund which is designed to rise twice as much as the NDX falls. There are inverse ultra funds for the other indexes as well. You can find out more about inverse funds at ProShares.com.
Chart 1
Chart 2
Chart 3
Chart 4
VIX IS ALSO RISING ... Another inverse index that's bouncing off its 200-day average is the CBOE Volatility (VIX) Index. I've written before about this measure of S&P 500 volatility showing signs of turning back up from major support near 40. Today's 14% jump in the VIX puts it back above its 50-day average and right up against last week's high near 53. A close above that initial barrier would turn its short-term from sideways to up. Chart 6 is a point & figure version of the VIX (with each box worth 2 points). An initial buy signal was given last week at 50. A close at 54 or higher would be another one. Unfortunately, buy signals in the VIX are bad for the S&P 500 which trends in the opposite direction.
Chart 5
Chart 6
DOLLAR STILL IN UPTREND... With all of the global turmoil, money coming out of foreign currencies is moving to the relative safety of the U.S. Dollar. Chart 7 is a point & figure version of the Power Shares US Dollar Index Bullish Fund (UUP). The UUP is in a p&f uptrend and is now approaching a test of its fourth quarter highs near 27.
Chart 7
SMALL CAPS BREAK NOVEMBER LOW... The only two market indexes that hadn't broken their November lows were the Nasdaq Composite and the Russell 2000 Small Cap Index. The only one left is the Nasdaq. Chart 8 shows the Nasdaq Composite nearing a test of its November intra-day low at 1295. Chart 9, however, shows the Russell 2000 closing below its November low at 371. Breadth figures were decidedly negative. The Dow closed below 7000 for the first time since 1997. The next downside target for the Dow is in the 6300-6000 region. Unless we get some type of snapback rally soon, a lot more important support levels are in danger of being broken.
Chart 8
Chart 9
TREASURY BONDS BOUNCE ... Since December, Treasury Bonds have experienced a downside correction as money moved into other fixed income groups. Today, however, Treasuries were the only fixed income group to end in the black. Chart 10 shows the 20+ Treasury Bond Fund (TLT) stabilizing above chart support along its fourth quarter highs.
Chart 10
