12 days ago the “Power of the Pattern” reflected that a great price point was at hand to short Silver in the “Hi Low(er) Silver post and suggested aggressive investors would want to pick up shares of ZSL. (see post here)
CLICK ON CHART TO ENLARGE
The first flag/pennant pattern saw SLV lose over a third of its value in less than 2 weeks.
Suggested to short Silver at (1) in the above chart and so far the breakdown in SLV and SLW are reflecting that long investors in Silver are along for a very rough ride!
Ole Doc Copper/FCX was sending a bearish message last week in the metals complex (see post here) and a similar message is being sent again by SLV/SLW, per global softness is at hand.
I actually shorted Silver for a quick 3 day trade out of the triangle last week. I covered around $31 on the futures.
Man… people hate this asset! This is also setting us up for a great Silver buy for the long term investors. The US Dollar is currently saved by the fog covering its issues and problems… the fog is the European problem. However, the spotlight will turn to the US in months or years ahead, and when the money starts leaving Treasuries in a big way… boy will stocks and commodities fly!
DG…Great comment and thought process.
Stepping aside from the May 6th issue, the math issue on the leveraged ETF’s are real, which is much more important to your original question. As you know the day to day pricing is great on these products, when when attempting to hold them for a longer period of time, performance challenges comes into play.
I appreciate your viewership and bringing up these important issues,
Chris
My hypothesis Chris, on the May 6th disparity in long/short ETFs, is….
Essentially, there was a lack of buyers/sellers at the extreme pivot points, such that if there wasn’t a trade at the pivot then there was no ‘print’ of the extreme price.
Alternately, I distinctly recall seeing the SPY puts on that date run up to the hundreds [of dollars] and if I recall correctly, even the thousands!
Doing a quick search on google’s archives, others saw it too!
http://www.elitetrader.com/vb/printthread.php?threadid=198144
Herein, I believe the bid and ask prices may have temporarily run up on these inverse ETFs, but simply there wasn’t enough volume at the time of the spike!
Further, it is difficult to catch these spikes using stop/limit orders, simply b/c the price often has to trade BEFORE the order executes.
— A potential solution – using “contingent” orders, where you can adjust the order to execute based on the bid/ask price only.
Kindly,
dg
Thank you for sharing this with our viewers. For ultra aggressive short-term/ day traders, this is awesome news. I remain a boring guy, in that I prefer the 1x ETF’s over the 2x/3x, due to the pricing challenges leverage brings to these products on a mutiple day basis. I am not saying that very short term traders shouldn’t use them, they just have challenges I like to stay away from.
When I suggest ZSL or SMN, the leverage doesn’t appeal to me at all. I use them due to a “lack of” a 1x short silver/1x short basic materials that has volume.
I really apprecaite you bringing up this new product. I will not judge anyone who uses it or ever say it is a bad product. This is just a personal preference issue with me. I do have concerns that if we would have a big time decline/crash, that some of these leveraged products could have some challenges on their hands.
Last year, during the flash crash, did anyone notice that the some long etf’s tanked, yet some of the short etf’s that should have went through the roof didn’t?!?!? Hmmmm….. I sure would hate that as investors we were right about direction and then happened to own a product that disappointed us.
Hope this helps a little, not gospel for sure!
Chris
What about the new USLV and DSLV? Larger ‘average day range’ due to higher leverage on the instruments.!
Seeking your advice as an ETF pro, do they have the royal ‘Kimble stamp of approval’ for usage?