After falling a total of 193.79 points in two trading days, the
Dow Jones Industrial Average
did its best impression of a live, cat-nip induced bounce of 100.47 points on June 26. But the bounce died and gave it all back in a decline of 14.39 points.
Use this dead-cat bounce to add technically bearish short positions that can rise in value as the market continues to attempt a correction.
To be considered technically bearish, the following ETFs have a five-day moving average below their 10-day moving average. Also, the moving average convergence-divergence indicator gave a fresh "sell" signal within the last 10 days.
The first ETF on this week's list is the
Regional Bank HOLDRs Trust
. The fund has lost 3.45% in the last month and 3.60% in the last week as defaults on subprime loans continue to surge.
The high level of home foreclosures contributed to a one-year composite decline of 2.13% by April 30 in major metropolitan area home-resale value as measured by S&P/Case-Shiller. This is bad news for banks taking back homes and getting stuck with non-performing assets.
The second place award goes to the
iShares Silver Trust
, which gapped down 1.92% at the open of trading on June 26, sliding further down throughout the day. Since April 2006, the price of silver has remained between $10 and $15 per Troy ounce.
At $12.26 per ounce, this metal is breaking below the midway point and heading toward the low end of the range. Some traders are opting to hold the 10-year U.S. Treasuries, which are now yielding as much as 5.11%, instead of silver bullion, which does not generate any income.
The third ETF giving a bearish signal is the
PowerShares Dynamic Retail Portfolio
. The fund's assets are allocated to 74.0% retail, 10.1% food, 7.7% Internet, 5.5% distribution & wholesale and 2.7% commercial services. The biggest holdings include
Tracking the Dynamic Retail Intellidex Index, this fund does not hold any shares in the retail giant
, but instead holds companies competing with Wal-Mart. That's one more reason to be bearish on this ETF.
Lastly, this past Sunday I was fortunate to have an audience with U.S. Senator Bill Nelson of Florida. On top of immigration and Iraq, Sen. Nelson spoke of the work the Senate completed on the energy bill.
The Senate passed alternative fuel mandates and higher gas mileage CAFE standards. As the bill may get even stronger in the U.S. House, Senate passage was not considered good news for the companies held by
SPDR S&P Oil & Gas Exploration & Production ETF
. The fund has fallen 7.47% in the last week and has room to slide.
The market not being able to hold onto gains is a sign that the bears are winning this round. But, don't forget to protect yourself by using stop-loss orders to attempt to limit your risk of loss in a sudden rally. Good luck.
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.