Triple ETF Options Landscape

By Bill Luby on July 21, 2009 | More Posts By Bill Luby | Author's Website

Since I find myself increasingly active in trading options in triple ETFs, I thought readers might find it interesting to see a graphic of some important options data on the triple ETFs currently in the market.

Utilizing data from iVolatility.com, the spreadsheet below captures the average options volume, open interest and current implied volatility for the 12 pairs of triple ETFs. I have separated the ETFs into four groups: broad index ETFs (market cap focus); sector ETFs; geography ETFs; and bond ETFs. I have also color coded the top five pairs in terms of liquidity in green, with two additional pairs highlighted in yellow that I believe are liquid enough to trade, though do not yet have the following of the “big five.” I will refrain from additional comments, other than to note that I believe a lot of additional information of interest can be gleaned from this relatively simple graphic.

For a related post, see: Using Options to Control Risk in Leveraged ETFs

Has There Been A Shift In US Dollar Sentiment?

By Brian Kelly on July 21, 2009 | More Posts By Brian Kelly | Author's Website

For the better part of the last year the US dollar and US equities have been like two best friends on see saw. If equities went down the dollar went up; equities go down, dollar goes up. However, last week we saw a change in behavior, as the US equity markets hurdled toward new highs the dollar remained range bound. Even with the strength in shares prices, the US Dollar Index remains above its lower bound of 78.33. This may signal a shift in sentiment among the currency crowd.If the global economy is recovering then the US is the only country that can truly lead a global recovery. To that end, US assets become more attractive, and to buy those assets investors need dollars.

In fact, the TIC data released last week from the US Treasury shows some evidence of just such a phenomenon occurring.privaet-foreign-purchases-of-financial-assets













In May, private foreign entities actually sold US Treasury bonds and increased purchases of US equities; private foreign purchases of equities increased by 359% month over month. Moreover, it was only February that foreigners were net sellers of US equities. We note that the US dollar increased from mid-March to April.
As well, the most recent trade data indicated that exports of goods increased for the first time since February, just prior to dollar strength.Furthermore, as other countries struggle with continued economic weakness they will be forced to increase quantitative easing (we are looking at you Great Britain!). Therefore, our theme remains the same; we are long US dollars against currencies that have structural economic imbalances and whose leaders have publicly stated the desire for a weak currency. With the recent weakness in the dollar we fear we may be early on our timing, we shall keep stops and if stopped out look for a re-entry point.

Eliot Wave: $ Index, Consolidation from Early June Complete?

Daily Forex Technicals | Written by Foreign Exchange Analytics

The long held, longer term bearish bias in the $ index remains in place as trade from the early June low at 78.35 is seen as a correction (wave 4 in the fall from the March 4th high at 89.60), and with eventual new lows after (within wave 5, see “ideal” scenario in red on weekly chart below). Note however that such a break to new lows below 78.35 would be seen as the final downleg in the whole decline from last March. Switched the longer term bias to the bearish side on the early March “false break” above the Nov high at 88.45, but will be looking for signs of a more important bottom on new lows below 78.35 to switch out. Longer term support below there is seen at 75.85/00 (Sept 2008 low) and the base of the bearish channel since March (currently at 75.25/40).

Nearer term, the market remains heavy after last week's break of the bullish trendline since early June, greatly increasing the likelihood that the consolidation since that low is “complete”, and with new lows below 78.35 ahead. Note too that the daily macd is in sell mode (see bottom of daily chart/2nd below), adding weight to the view of further downside ahead. However on a very short term basis, there is scope for a few days of consolidating before resuming the downtrend (also potential for a few days of consolidating in the $ versus a number of currencies, see scrolling commentary at www.fxa.com/solin/comments.htm ). So instead of just hitting bids here, would wait for a near term bounce toward 79.75/85 to short (higher entry, lower risk). Further resistance above there is seen at the broken trendline since Jun low (currently at 80.00), and the bearish trendline from the June 8th high (currently at 80.65/75, with a close above a sign to stop).

Euro May Rise to 7-Month High Versus Dollar: Technical Analysis

(Bloomberg) -- The euro may extend its rally to a seven-month high against the dollar within two weeks after the currency rose above resistance at $1.4120, said Pak Lai Ng, a technical analyst at Forecast Pte, citing trading patterns. Resistance at $1.4120 represents a descending trend line on a so-called triangle pattern, Ng said. The triangle is formed by the descending trend line, which connects the highs of June 3 and July 1, and by an ascending trend line, which connects the lows of June 16 and July 8, according to Ng. Resistance is where sell orders may be clustered.“The euro has broken the triangle pattern to the upside,” Singapore-based Ng said in an interview. “It should see quite a quick run-up. The target is $1.4650.”

The euro fell to $1.4213 as of 12:35 p.m. in Tokyo from $1.4231 in New York yesterday, when it advanced to $1.4249, the highest level since June 5. The currency has risen 2.7 percent against the greenback since dropping to a two-week low of $1.3833 on July 8. The $1.4650 level was last seen on Dec. 18.Daily momentum indicators such as the moving average convergence/divergence, or MACD, also show a buy signal for the euro against the dollar, according to Ng. “All of them are positive,” he said.The euro’s MACD versus the dollar was 0.0062, compared with 0.0043 for the so-called signal line, based on data compiled by Bloomberg. A rise of the MACD above the signal line suggests the currency is in an “upward” trend, Ng said.

MACD charts can indicate whether a price shift is a change in trend or a short-term deviation by comparing moving averages based on nine-, 12- and 26-day periods.In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.

Oil to Rise Above $65 After Support Holds: Technical Analysis

(Bloomberg) -- Crude oil may extend gains above $65 a barrel as an indicator of technical momentum suggests the market has rebounded after failing to break support levels last week, according to National Australia Bank Ltd. The Moving Average Convergence-Divergence oscillator on the weekly continuation chart is “a whisker away” from turning positive, said Gordon Manning, a Sydney-based technical analyst. Technical buyers usually step in when the MACD rises above its signal line, a so-called bullish crossover.“That reading says to me we’ve had the correction,” he said in a telephone interview. “We’d really spent the last three to four days rounding the bottom. There’s a very good chance the pullback is already over.”

Oil dropped to $59.52 a barrel on July 14, the lowest settlement since May 18, amid uncertainty over the prospects for a rebound in global demand. The market recovered last week to snap a four-week losing streak and is up 44 percent this year. The contract for September delivery on the New York Mercantile Exchange, which rolls to the front month tomorrow, rose 10 cents to $65.39 a barrel at 9:10 a.m. Singapore time.Prices face further upside resistance at the June 30 intraday high of $73.38 a barrel before any approach toward the $88-to-$100 area, Manning’s longer-term price target. Oil hasn’t traded above $88 since Oct. 9 last year. Technical readings, as well as fundamental indicators, currently don’t favor a rally of that magnitude in 2009, he said.To reverse the move higher, the market may have to sink further than the July 13 drop to $58.32 a barrel, which remains the lowest in eight weeks, before it will re-enter a descending channel.“We’d have to see the lows of four to five days ago get taken out,” said Manning.