Between FAZ and FAS by themselves (which didn't even exist half a year ago), nearly 900 million shares changed hands today. 900 million! Forgive my bluntness, but I'm starting to think that going long FAZ, like buying lottery tickets, is a tax on stupidity. Or at least one of the most efficient wealth transfer mechanisms ever created.
What's apparent to me (a skosh too late) is what a superbly "technical" pattern FAS (its profitable brother) has laid out. Indeed, although a lot of people completely dismiss the ideal of using technical analysis on "ultra" ETFs, it holds up remarkably well in some cases. Just look at this:
There are all kinds of cool things going on:
- The very clean downward channel;
- The upside break of that channel around $5, which was a great buy signal;
- The steadily ascending volume which led to the breakout;
- The ascending right triangle, completed today, showing a pronounced breakout
I cringe to say it, but if this were a "normal" stock, it would be a pretty obvious buy. It's hard to fathom that a triple-bullish ETF based on financials would be a buy at this point, but it's a really sweet chart.
FAZ, on the other hand, is a complete catastrophe:
Over the past couple of months, this has been good for nothing except losing money. Can you believe this was a $200 security at one point? The volume today – a new record – was made as another 20% was hacked off this pathetic pile of garbage. Billions of dollars have been moved out of some pockets and inserted into others.
This countertrend rally has been a huge, huge grind. The NASDAQ is the only index showing any signs of weariness. I truly thought we'd see a move up to 850, and then a retracement to 750, and then a push to 1050 on the S&P.
As it is now, there hasn't been any meaningful interruption, so the retracement to 750 seems like a distant memory. I do think we will still get a meaningful retracement at some point before we make the final countertrend peak, but I'm starting to think that the peak – – based on the strength of this rally – – might not be 1050 after all, but something even loftier, like 1200. It is difficult to ignore the power and viciousness of this rally.
With bullish sentiment having moved from 2% to 80% in the span of two months (just look at the New York Times to read all the flowery stories about how great everything is now), I don't think we're going to keep going straight up. But I'm the first one to admit that getting this far without a single pause has left me shocked and more than a little disappointed.
