A quick note to the many readers who have sent me the following question: "You have shorted FAS, should I go long on FAZ if I don't want to short something?"
We do not recommend using the leveraged ETFs as a long vehicle, as they suffer price decay consistently over time, and only overcome that when the market runs one way with little or no pauses for some time. (This is not a very common occurrence, so generally the decay will work against you). You are better off to catch any of them on high levels of sentiment in conjunction with high levels of sentiment in the assets they are leveraging, and short-sell them.
Once the market starts working against a leveraged ETF, even in a slow, steady way, the declines are greater relative to the gains because the gains are coming off of lower price points (i.e. a 3% loss from $50.00 is larger than a 3% gain from $48.50).
Here's an updated chart of FAS with some more in-depth analysis.
And our thoughts on the broad markets as a whole:
Have a great weekend everyone!
A quick note for next week - I will be doing some ice-fishing during the middle of the week next week so I won't be posting for Tuesday, Wednesday, or Thursday.
Stay warm, and keep your heads up out there.
End of Day Update, due to the barrage of email I have received sine the market enclosed. In the last hour, I've read more variations on "I think gold just bottomed" or "you are suicidal if you think gold is going down now!" than I thought the English language could produce!.
Thought I'd throw up a chart of GLD to pull in some perspective. Have a great weekend!
Just remember that we are unwinding a 14 month uptrend that has grown rife with skyward expectations for the price of gold. Such a thing will take some time, and serious price action, to neutralize this optimism.