Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
Learned Helplessness
I've been MIA from comments for nearly a week, since I'm busy with so many other matters, but I happened to see this morning a mention on Slope (from which I derive pretty much all my worldly information) that ProShares was getting sued over its SRS fund. A portion from the press release states:
ProShares sells its Ultra and UltraShort ETFs as "simple" directional
plays. As marketed by ProShares, Ultra ETFs are designed to go up when
markets go up; UltraShort ETFs are designed to go up when markets go
down. The SRS Fund is one of ProShares' UltraShort ETFs. The SRS Fund
seeks investment results that correspond to twice the inverse (-200%)
daily performance of the Dow Jones U.S. Real Estate Index ("DJREI"),
which measures the performance of the real estate sector of the U.S.
equity market. Accordingly, the SRS Fund is supposed to deliver double
the inverse return of the DJREI, which fell approximately 39.2 percent
from January 2, 2008 through December 17, 2008, ostensibly creating a
profit for investors who anticipated a decline in the U.S. real estate
market. In other words, the SRS Fund should have appreciated by 78.4
percent during this period. However, the SRS Fund actually fell
approximately 48.2 percent during this period — the antithesis of a
directional play.
plays. As marketed by ProShares, Ultra ETFs are designed to go up when
markets go up; UltraShort ETFs are designed to go up when markets go
down. The SRS Fund is one of ProShares' UltraShort ETFs. The SRS Fund
seeks investment results that correspond to twice the inverse (-200%)
daily performance of the Dow Jones U.S. Real Estate Index ("DJREI"),
which measures the performance of the real estate sector of the U.S.
equity market. Accordingly, the SRS Fund is supposed to deliver double
the inverse return of the DJREI, which fell approximately 39.2 percent
from January 2, 2008 through December 17, 2008, ostensibly creating a
profit for investors who anticipated a decline in the U.S. real estate
market. In other words, the SRS Fund should have appreciated by 78.4
percent during this period. However, the SRS Fund actually fell
approximately 48.2 percent during this period — the antithesis of a
directional play.
This is just pathetic. I mean, I'm no raging fan of SRS – – "the widow-maker" – – since I've lost money just about every time I've touched it. But, even so, I have an intuitive sense that when you are dealing with an "ultra" fund of any kind, you either have to use it as a day-trading vehicle, or you sure as hell better know that the underlying assets are going to steadily trend in one direction or another in order to make money.
Because, look, if you give me a wad of money, and I put it into an asset class which goes down 1%, up 1%, down 1%, up 1%, and so on, ad infinitum – – and I am doubling the impact of those moves – – you are going to lose money! I'm no math wizard, people – I was the first person in my high school to ever score a "1" on the Calculus AP exam – but even a math numbskull like me can understand this.
So for these attorneys to be piously stating that SRS is the "antithesis of a directional play" implies an ignorance of simple arithmetic which I find breathtaking.
Seeking Exhaustion
Recently, I'm starting to (finally) see some shorts bear the kind of fruit I expect, falling 15% in a single day. I've been seeking issues that have exploded many hundreds of percent over the past few months and seem ready to tumble back to earth. Here's an example from today:
I really like trades like this, because the amount of gravity pulling them down is immense. In some instances, like DTG, it can be hazardous shorting too early, since you never know just how close to their breakdown point they will continue to climb.
Euro Watch
I'm a little obsessed with the EUR/USD right now, because it pretty much will answer all the questions that are important to me: what will gold's direction be? Oil? Equities? I put a lot of value in the direction of this one chart.
Even though it broke above a resistance line, it's been noodling around that line every since, tap-dancing right on top of it.
A close look reveals just how important this line is.
Needless to say, it is a constant resident on one of my monitors.
What’s a Reasonable Target?
Let's say – just for the sake of argument – that the market actually gets a little bit of softness that lasts for more than 17 minutes. How far down will it go?
I'm personally using the 950 level on the /ES as my target. I have a couple of reasons for this. First, that represents an important prior breakout level; and second, it is approximately where the fan line is (which is the same fan line as the one representing support from the oh-so-painful failed H&S pattern).
Is that the lowest it would go? Well, obviously I'm counting on much lower prices before the year is over, but I'm not sure if we'll make another dim-witted lunge higher (to…….1050? 1150? 1200?) or slip below the fan line and start withering away. Based on the manipulations from our dear friends at Goldman Sachs, I'd lean toward another lunge higher
