DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
Mind The Gap
Leveraged ETFs are to be used only when fully appraised of the risks. In short, get it right and you will be much happier than the regular equivalent funds, get it wrong, and you will be nursing fatter losses for longer than the vanilla alternatives. Oh and also, most levered funds are much less liquid than their more pedestrian cousins, which means the price you see may not be the price you get, at least not if you are moving a lot of units or you want in or out in a hurry.
Markets right now have suffered what many commentators view as the worst start to a year in a whole lot of years. If Q2 2020 - Q3 2021 was the era of, stocks only go up, then, 2022 YTD is the era of, down is the new up. Every day brings only more misery for stockholders it seems.
At some point, this will end. It could crash - not, a prolonged sell-off as we’re currently experiencing, but an actual crash - so with any new commitment of capital you probably want an actual or mental stop-loss level in place. But if you were to ask us we would say that the bottom is near for this current downdraft. Our larger-degree market analysis indicates that 4000SPX ought to provide a floor, and indeed even down to 3800SPX still supports a move back up to new all time highs within 18 months or so.
For a general recovery play you can just scale into the SPY and QQQ ETFs, buy a little on red days, that sort of thing.
For a more adrenaline-fuelled experience you may wish to consider UPRO - that’s a 3x levered daily S&P500 ETF. “Daily” means the fund targets 3x the S&P500’s daily return. vs. SPY targeting 1x the S&P500’s daily return. Most investors who use UPRO don’t hold it for particularly long periods, instead using it to amplify the effect of shorter-term trades.
Here are a few levels you can use if you are thinking about trading UPRO.