UltraShort S&P500 ProShares (SDS) — This exchange-traded fund (ETF) seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the S&P 500 Index (SPX). The fund normally invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index.
I have regularly reviewed SDS, pointing to the number of buying opportunities over the course of the bear market.
On June 17, I wrote, “Now, with the strong possibility of a reversal in stocks following the big rally from the early March lows, there is the opportunity for a trade here.
“The SDS has pulled back to its major long-term support zone at $52 to $55; reversed on high volume; penetrated the short-term downtrend line as well as the 20-day moving average; and formed a double-bottom.
“Traders can look forward to a possible rebound to the 50-day moving average at $62, and perhaps even the 200-day moving average at $74.”
And, on June 23, I wrote, “This still our goal, but this is a volatile ETF, and it could pull back sharply on a reflex rally. Therefore, new positions should be entered on a pullback unless SDS closes above the 50-day moving average on high volume, which would give another strong buy signal.”
The 50-day moving average has been broken along with a double-top breakout. Still, don’t chase SDS. Wait for a reflex rally “dead-cat bounce” to take new positions.
For those already long, the immediate target is $62 — take that profit and wait for a new entry point.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of some of his most recent market outlooks.
