Category Archives: Foreign

A Hedged Bet Against China

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Every trading day, Portfolio Armor ranks all of the hedgeable stocks, ETFs, and other exchange-traded products in the U.S. by its estimate of their potential return over the next six months, based on an analysis of price history and option market sentiment. Then it subtracts hedging costs, and ranks them all by potential return net of hedging costs, or net potential return. It’s a method of security selection we backtested 25,412 times over an 11-year time period during which it generated solid returns, on average.

On Thursday, the highest-ranked ETF, and the 7th-ranked security overall, was the Direxion Daily FTSE China Bear 3X Shares ETF (YANG), a triple-levered bet against China, with a potential return of 13.6% over the next six months.

As of Thursday’s close, you had a shot of capturing that potential return, while limiting your downside risk to 13.6% – and getting paid to hedge – by using the optimal collar below: (more…)

Third Major Leg Down Ahead For Shanghai Index?

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You can see my original post of July 8th and four subsequent updates covering China’s Shanghai Index here for background information.

In my last update of September 8th, I noted that a bearish moving average Death Cross had formed on the Daily chart and price closed at 3170.45. Since that date, price moved sideways for over a month before it, finally, rallied to where it closed today (Tuesday) at 3604.80.


Will Japan & China Lead Markets Back Up?

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How strong is Japanese influence on U.S. markets?

Will the Shanghai Index regain strength on Monday?

Without U.S. markets opening until Tuesday, we may see an attempt by Japan’s Nikkei Index and China’s Shanghai Index to bounce somewhat. It may not become clear until Tuesday’s close as to the potential strength of any sustainable rally in these Indices, along with the S&P 500 Index. Furthermore, there are quite a lot of economic reports being released on Monday for Japan and China, which may influence Tuesday’s trading.

I’d keep a close eye on these three Indices, along with the USD:JPY forex pair, which have all traded lock-step (as shown on the following 1-Year Daily comparison chart), as to which direction the next (sustainable) breakout will occur.

Muted Response

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Well, we all woke up to this (typically breathless) headline from ZH:


This has led to some red tones in our own pre-market quotes, although the 0.29% drop in the ES as I’m typing this is hardly a crash of its own, of course.

The irksome thing is that the market’s irrational unpredictability is more acute than ever. Take yesterday morning for example (please!) in which it looked like it was shaping up to a nice, smooth, steady descent in equities (tinted area on the left). All was going well, and then, RIP, a huge rally based on no volume and on no news.

I’d normally be more invigorated by the miniature “top” we’ve got this morning (the tinted area on the right) except for the fresh sting I feel from yesterday’s rally. I have no ETFs of any kind, but zillions of tiny equity shorts. We’ll see……….


Blame It On Rio

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Poor Brazil. Their president has the lowest approval rating in the history of any elected leader in recorded history (last I checked, 8% and falling – – even lower than Obama!), their commodities-dependent economy is in tatters, their stock market does nothing but fall, and their feces-infested waterways are freaking out those planning to be in the Olympics in 2016 who fear getting terribly ill. Sometimes things are so broken, they just keep getting worse: