Top 10 Leveraged Long, Short International ETFs

NEW YORK ( ETF Digest) -- Since global central banks have been injecting liquidity and lowering interest rates to historically low levels global equity markets have become highly correlated. Perhaps only the degree of change has varied between global equity markets and associated ETFs. It's natural that some sectors, even as they trend in the same direction, may show greater volatility given the news cycle. From those events they then become the source of how other markets perform as well.

Most global worries of late have centered on the eurozone. The debt crisis has rocked the 17 member EMU (European Monetary Union) to its core and threatened its very survival. Most southern member countries (Greece, Italy, Spain and Portugal) have been at the epicenter of concern. Many of these countries are almost entering a receiver-like position vis-a-vis the European Union itself. Without a "political" union there are few fiscal controls the central union has over its members. This may change. In fact it is changing in a de facto manner as central authorities dictated terms to these debt riddled countries to maintain their membership status.

All in all, many feel authorities are printing money and bailing out members which, politically, merely buys time. But we shall see.

Leveraged issues have been the subject of great controversy. Some believe, mistakenly in our opinion, short leveraged products particularly were in some ways responsible for enhancing stock market declines during the 2008 bear market. These views are mistaken since there were many other products (options and futures) that allowed investors to short major market indices. 

Critics suggest that since there was and is no "uptick" rule for shorting this enhanced market declines. But, all one had to do was watch a live market streaming tape during the worst of the declines and you would see plenty of upticks with the decline.

Also, critics are more correct to point to presumed tracking inefficiencies. A typical investor would complain after buying one of these products and see a few months later they didn't match the expected two or three times the index or ETF. This was primarily due to longer holding periods when periods of high periods of volatility persisted combined with compounding problems given daily tracking methodologies used by sponsors. We've written more about this in this article .

One thing remains clear when dealing with leveraged issues of all types--they must be traded and used tactically. They're not "buy and hold" products, but then neither are alternative products like options or futures. Investors wishing to participate in these issues must understand the higher risks associated with these including tracking issues cited above. Investors must be sophisticated and experienced in their dealing employing strategies to mitigate higher risks associated with these products.

We have found that successfully dealing in these requires a technically-based approach.

Leveraged issues can help investors hedge their long exposure tactically using inverse and/or leveraged short issues. Oddly there may be more liquidity in leveraged issue versus -100 inverse issues. Also if an investor senses they missed a long or short move and wished to catch-up to the new trend then a leveraged issue can help them achieve at over a short period. 

We're not ranking these ETFs favoring one over another so don't let the listing order mislead you. The current list of ETFs may change in the future as based on market ever changing market trends various sectors can wax and wane in liquidity and performance. In other words, whatever sector is "hot" at the moment will attract the assets.

Although we may use some of these in ETF Digest portfolios it's not our intention to recommend one over another. That said, generally the easier and more efficient trading is found with those issues offering the best liquidity. In our experience, and given the potential volatility and liquidity concerns "limit orders" are always the best method to insure a more satisfying exposure.

ProShares and Direxion Shares dominate the offerings in this category. The following charts are based on weekly presentations featuring 22 period moving averages, a Relative Strength indicator and conventional MACD moving averages. Not shown but perhaps referred to are Tom DeMark indicators which we use in conjunction with other proprietary indicators to determine positions. DeMark indicators are available to ETF Digest Premium Members.  

To determine positions it is often most useful to track the relevant indexes and/or conventional ETFs to which these leveraged products are linked versus these issues alone. Often erratic behavior of the leveraged issues can alter what might ordinarily be the right position. Further, the best experience in dealing with these issues is to use limit orders when engaging in them and keying those off the underlying indexes. Therefore, it's important in our opinion to remember to remain disciplined and systematic in using these issues. Due to occasional tracking errors caused by high volatility combined with compounding issues it's vital that these products are used for trading purposes--just inspecting the YTD performance data reflects this. As such technical analysis is vital in determining positions in our opinion.

Not all the ETFs listed have substantial AUM (assets under management). Much of this is due to the ebb and flow as indexes tracked move bullishly or bearishly. When viewed in the fall of 2011 AUM was the reverse from current views. Naturally this was due to more bearish conditions then versus bullish conditions as this report was written.

It may be some issues that suffer severe losses in AUM will see reverse splits at some point. In fact, some issues may cease to exist from a business view of the issuers. This hasn't happened yet and issuers are anxious to keep hard won issues available despite losing money on maintaining them.

ProShares Ultra 2 X Bull EAFE ETF (EFO) & ProShares 2 X Bear EAFE ETF (EFU)

EFO & EFU follow the MSCI EAFE Index. The funds were launched in June 2009. The expense ratios are .95%.

EFO AUM (Assets under Management) equal 11 million and average daily trading volume is less than 3K shares. As of early March 2012 the YTD return was 23.22%. The one year return was -22.85%.

EFU AUM equal $18 million and average daily trading volume is $19M shares. As of early March 2012 the YTD return was -21.24%. The one year return was -13.51%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday.

Direxion Shares 3 X Bullish EAFE Sector ETF (DZK) & Direxion Shares 3 X Bearish EAFE ETF (DPK)

DZK & DPK follow the MSCI EAFE Index. The funds were launched in December 2008. The expense ratio is .95%.

DZK AUM equal $25 million and average daily trading volume is 35K shares. As of early March 2012 the YTD return was 37.50%. The one year return was -45.33%.

DPK AUM equal 14 million and average daily trading volume is 43K shares. As of early March 2012 the YTD return was -30.39%. The one year return was -28.92%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday.

ProShares Ultra MSCI Europe 2 X Bull Europe ETF (UPV) & ProShares MSCI 2 X Europe Bear ETF (EPV)

UPV & EPV follow the MSCI Europe Index. The funds were launched in April 2010. The expense ratio is .95%.

UPV AUM equal $3 million and average daily trading volume is less than 7K shares. As of early March 2012 the YTD return was 25.09%. The one year return was -24.16%.

EPV AUM equal $122 million and average daily trading volume is 254K shares. As of early March 2012 the YTD return was -23%. The one year return was -26.51%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.


ProShares Ultra 2 X Bull Emerging Markets ETF (EET) & ProShares 2 X Bear Emerging Markets ETF (EEV)

EET & EEV follow the MSCI Emerging Markets Index. The funds were launched in June 2009. The expense ratios are .95%.

EET AUM equal $30 million and average daily trading volume is 9K shares. As of early March 2012 the YTD return was 34.14%. The one year return was -12.88%.

EEV AUM equal $64 million and average daily trading volume is 289K. As of early March 2012 the YTD return was -29.52%. The one year return was -27.57%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

Direxion Shares 3x Bullish Emerging Markets ETF (EDC) & Direxion Shares 3x Bearish Emerging Markets ETF (EDZ)

 

EDC & EDZ follow the MSCI Emerging Markets Index. The funds were launched in December 2008. The expense ratio is .95%.

EDC AUM equal $400 million and average daily trading volume is 857M shares. As of early March 2012 the YTD return was 60.54%. The one year return was -32.57%.

EDZ AUM equal $150 million and average daily trading volume is 2M shares. As of early March 2012 the YTD return was -41.39%. The one year return was -47.11%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

ProShares 2x Bull FTSE China 25 ETF (XPP) & ProShares FTSE Bear China 25 2x ETF (FXP)

XPP & FXP follow the FTSE/Xinhua 25 Index (+/- 200%). The funds were launched in June 2009 and the expense ratios are .95%.

XPP AUM equal $36 million and average daily trading volume is less than 37K shares. As of early March 2012 the YTD return was 32.89%. The one year return was -15.30%.

FXP AUM equal $157 million and average daily trading volume is 302K shares. As of early March 2012 the YTD return was -27.53%. The one year return was -26.61%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

Direxion Shares 3x Bullish Latin America ETF (LBJ) & Direxion Shares 3x Bearish Latin America ETF (LHB)

LBJ & LHB follow the S&P Latin American 40 Index (+/- 300%). The funds were launched in December 2009. The expense ratio is .95%.

LBJ AUM equal $48 million and average daily trading volume is 36K shares. As of early March 2012 the YTD return was 53.78%. The one year return was -37.32%.

LHB AUM equal $ million and average daily trading volume is 30K shares. As of early March 2012 the YTD return was -38.73%. The one year return was -41.89%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

ProShares Ultra Brazil 2 X Bull ETF (UBR) & ProShares 2 X Brazil Bear ETF (BZQ)

UBR & BZQ follow the MSCI Brazil Index (+/- 200%). The funds were launched in April 2010. The expense ratio is .95%.

UBR AUM equal $17 million and average daily trading volume is 40K. As of early March 2012 the YTD return was 43.73%. The one year return was -17.09%.

BZQ AUM equal $11 million and average daily trading volume is 70K shares. As of early March 2012 the YTD return was -33.30%. The one year return was -23.21%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

ProShares Ultra 2 X ex-Japan ETF (UXJ) & ProShares 2 X Bear ex-Japan ETF (JPX)

UXJ & JPX follow the MSCI Pacific ex-Japan Index (+/- 200%). The funds were launched in April 2010. The expense ratios are .95%.

UXJ AUM equal $3.2 million and average daily trading volume is 3K shares. As of early March 2012 the YTD return was 29.98%%. The one year return was -12.48%.

JPX AUM equal $2 million and average daily trading volume is less than 2K shares. As of early March 2012 the YTD return was -24.39%. The one year return was -26.09%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

Direxion Shares 2 X Bull India ETF (INDL) & Direxion Shares 2 X Bear India ETF (INDZ)

INDL & INDZ follow the Indus India Index (+/- 300%). The funds were launched March 2011. The expense ratios are .95%.

INDL AUM equal $21 million and average daily trading volume is 40K shares. As of early March 2012 the YTD return was 79.72%. The one year return was -22.46%.

INDZ AUM equal $4 million and average daily trading volume is 11K shares. As of early March 2012 the YTD return was -51.37%. The one year return was -30.34%.

Both ETFs have low AUM and trading volume is relatively light. Those wishing to utilize either should be prudent with order entry to insure reasonable fills relative to the tracking index which is available on the company's website intraday. Remember, these ETFs and sectors wax and wane in popularity and can do so quickly.

There will be many changes to this line-up as market sentiment switches bullishly/bearishly from one sector to another. Both ProShares and Direxion have a good line-up of U.S. sectors and perhaps different issues will rise to the fore with changing market conditions.

We've only included sectors of overall interest versus those perhaps trending well. Low volume for some remains a serious consideration. Nevertheless the reality is liquidity will build one way or another with trends versus any fundamental beliefs.

With each quarterly update sector rotation can occur changing those ETFs featured. The competition between ProShares and Direxion shares remains intense. To make these issues perform at their optimum level from a trading perspective the more liquidity the better.

One important feature to watch is the flow of funds (AUM) from bull to bear and vice versa. This type of movement can indicate early which way professional investors may be leading markets.

Once again these issues aren't for everyone. They're to be used strategically and tactically either to speculate or add a quick hedge when needed. In our opinion a technical approach generally works best and this includes remaining disciplined and systematic at all times. 

For further trading information about portfolio structures including technical indicators including DeMark indicators using these or other leveraged ETFs see www.etfdigest.com .

As of this writing we have no current positions in any of the aforementioned products.

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The ETF Digest has no current leveraged positions from this list.

NEITHER THE EDITOR OR THE PUBLISHER, NOR ANY OF THEIR RESECTIVE AFFILIATES MAKE ANY GUARANTEE OR OTHER PROMISE AS TO THE RESULTS THAT MAY BE OBTAINED FROM TRADING GUIDANCE INDICATED ABOVE. IT IS FOR DEMONSTRATION PURPOSES ONLY AND IS IN NO WAY INTENDED AS INVESTMENT ADVICE.

(Data is believed reliable and is obtained from ETF sponsors and other sources.)