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What to Do During this Tapering Temper Tantrum?

By  +Follow June 21, 2013 9:45AM
Tickers Mentioned:

In this week's interview with Toni Turner of TrendStar Trading Group, we discuss the market's major sell-off, and where investors may hope to find support in the broader market.

EQ: Stocks are down over 3 percent since Ben Bernanke's press conference on Wednesday. Is this an overreaction from the market or were investors caught off guard?

Turner: I think the market is overreacting, though you could see bonds were falling pretty dramatically Wednesday afternoon as Bernanke was holding his press conference. So we definitely had a warning, and he even told us there was a timeline for slowing bond purchases and mortgage-backed securities. Frankly, the market just didn't like it. I've been using the analogy of a teenager whose getting his or her their allowance cut. It's never fun.

However, Thursday also showed that jobless claims rose, and adding to the angst, was the preliminary data released by HSBC that reported China's PMI slipped to a nine-month low. We also saw Brazil's drop due to their unrest, oil prices falling, and a sense that the world is really, on the whole, is looking at sluggish manufacturing numbers. When you combine those data with Mr. Bernanke's comments, I think a lot of people who have made profits in the market earlier this year may be just throwing up their hands and selling, saying it's enough because they don't want to take the chance of giving their profits back to the market.

EQ: Even with the volatility that we had seen over the last few weeks, the S&P 500 had held firmly above 1600. It broke below that on Thursday. What does that mean to you?

Turner: Well, holding above 1600 was optimal, but below that, I see support at 1580 and 1540. Of course, we want to see the Dow Jones Transportation Average Index and iShares Dow Jones Transportation Average (IYT) to remain at or above current levels at $109.

Certainly, if the S&P 500 drops, we don't want to see it confirmed by the transports as well. I think many people are taking profits from the bull market that we experienced through May, and if we fall another 2 to 3 percent, then investors may return to the market looking for new opportunities.

EQ: Are the volatility ETFs like the iPath S&P 500 VIX ST Futures ETN (VXX) a good place to look at right now?

Turner: The VXX tracks the Volatility Index on an intraday basis, which is good for one or two days of trading, but it's not meant to be used for the long term. If you look at the VXX on a chart that goes back to 2011, you can see it doesn't move in an exact pattern with the VIX over the long term.

EQ: So it's similar to the concerns of using leveraged ETFs in ways they weren't necessarily intended to be used?

Turner: What people have to realize with inverse leveraged ETFs is that they could be good vehicles to be used for day trading and possibly held overnight.

Anyone that gets into ETFs such as the ProShares UltraPro Short QQQ (SQQQ), which is the 3x inverse leveraged ETF that matches up with the Nasdaq 100, or the Direxion Daily Small Cap Bear 3X Shares (TZA), which is the 3x bear for the Russell 2000, need to know that these funds readjust on a daily value. What that means is if you were to hold them for a day or maybe the next day, and they stayed at the same price, your capital would drop because of the daily readjustments. So I would say to hold them no more than three days max.

I know people who have bought them, held them, and lost money just by doing nothing. It's not a good idea because these were not meant to be bought and held for any length of time.

We see inexperienced traders buy these inverse leveraged funds, and then maybe the trade goes against them. So, the trader decides to hold the fund, thinking it will move higher anderase their losses. But you have to realize that the whole time you're holding it, you risk two factors going against you: the movement of the underlying index moving against you, as well as your investment's value moving lower because the ETF is getting readjusted everyday like it's built to. We need to remember that in the hands of people who know exactly how they're built and how they work, these vehicles are fine. For people who don't understand them, they can be very dangerous.

EQ: Which sectors or industry groups look better than most for you at the moment?

Turner: It seems like we're throwing out all the babies with the bathwater right now, so I don't see much I'm willing to take on sectorwise, right now. I am, however, watching three agriculture commodities ETFs. Again, they should be played only by people who understand them. I'm watching right now are iPath DJ-UBS Livestock TR Sub-Idx ETN (COW), Teucrium Corn (CORN), and iPath Dow Jones UBS Grains Total Return Sub-Index ETN (JJG).

We have a drought in the Midwest and corn prices are down. There's more to it than that obviously, and people have to do more of their own research on these ETFs, but they have the potential to move go higher.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Results for IYT
4 Aug 15 07:58:30
Dicey Action http://t.co/iUw4z7sNnd $FXI $HEDJ $SPX $AAPL $NFLX $AMZN $GOOGL $XLE $IYT http://t.co/XG5hVFJGig
4 Aug 15 07:58:24
Dicey Action http://t.co/iUw4z7sNnd $FXI $HEDJ $SPX $AAPL $NFLX $AMZN $GOOGL $XLE $IYT http://t.co/IFXe4VLiF2
10X Trading
4 Aug 15 07:57:42
Dicey Action http://t.co/eoUPkCCoo2 $FXI $HEDJ $SPX $AAPL $NFLX $AMZN $GOOGL $XLE $IYT
4 Aug 15 07:55:21
$IYT Daily channel chart http://t.co/rEZYuNGtJ7
Michele Schneider
4 Aug 15 06:38:13
$IYT still looks really good
Stock Sheikh
4 Aug 15 00:00:53
RT @bosocial: RT Jake132013: PWDY Powerdyne International, Inc. Yield http://t.co/pDKEEm38U1 $PWDY $XLY $DDD $IYT #PWDY #stoc… http://t.co…
3 Aug 15 23:53:20
RT Jake132013: PWDY Powerdyne International, Inc. Yield http://t.co/pDKEEm38U1 $PWDY $XLY $DDD $IYT #PWDY #stoc… http://t.co/Csk7miZSkI
Stock Sheikh
3 Aug 15 23:41:36
RT @Jake132013: PWDY Powerdyne International, Inc. Yield http://t.co/CjqzwsApmD $PWDY $XLY $DDD $IYT #PWDY #stock #nasdaq
Jeff Quiggle
3 Aug 15 17:58:28
#Sector >: $XLP > $XLY $XLU > $IYR > $XLV > $XLF > $XLK > $ITB > $IYT > $XLI > $XLB > $XLE
3 Aug 15 16:41:45
MPC Marathon Petroleum Corp. Ask Size http://t.co/eGJz1hd0ir $MPC $MDLZ $IYT $TBT #MPC #finance #stocks
3 Aug 15 16:39:05
INTC Intel Corp. Tick http://t.co/au9TTx9bVH $INTC $IYT $GOOG $IEF #INTC #share #pennystocks
3 Aug 15 16:34:06
DGLD VelocityShares 3x Inverse Gold ETN Prev Close http://t.co/BeQDGewiLC $DGLD $IYT $ALRM $SPXU #DGLD #stockmarket #tradeideas
michael tirado
3 Aug 15 16:25:40
@WMwins @marketmodel only thing "breaking out" in $IYT is airline stocks. that'll be short lived
3 Aug 15 15:51:15
XLU Utilities Select Sector SPDR Change http://t.co/H4zIHogpez $XLU $FCX $DIA $IYT #XLU #stockmarket #nasdaq
3 Aug 15 15:45:03
SHV iShares Barclays Short Treasury Bond Fund News http://t.co/KiJfsPh1qX $SHV $TBT $VXX $IYT #SHV #investing #stockmarket
3 Aug 15 15:41:13
IYT iShares DJ Transportation Average Index Fund Ask http://t.co/f1OWg8kezd $IYT $EWZ $FXE $MNST #IYT #pennystocks #stockmarket
3 Aug 15 15:41:09
IYT iShares DJ Transportation Average Index Fund Ex-Div Date http://t.co/5n4CCnUdfZ $IYT $MU $T $SKX #IYT #stocks #tradeideas
3 Aug 15 15:41:06
KO Coca Cola Co. Market Cap http://t.co/nFGzF8ZeEm $KO $GILD $IYT $GREK #KO #tradeideas #nasdaq
Investors Hangout
3 Aug 15 15:40:04
IYT iShares DJ Transportation Average Index Fund Exchange http://t.co/9cx5HnuJ9b $IYT $UCO $VTI $MU #IYT #stockmarket #nasdaq
3 Aug 15 15:40:03
IYT iShares DJ Transportation Average Index Fund Filings http://t.co/hiL9RDrtnn $IYT $GG $IBB $EWH #IYT #stockmarket #finance
3 Aug 15 15:39:11
HD Home Depot, Inc. Shares http://t.co/lrSJ5uvpIh $HD $IYT $CELG $JPM #HD #pennystocks #stockmarket
3 Aug 15 15:37:39
DPZ Domino's Pizza Group LTD Day Low http://t.co/FflycaiY86 $DPZ $IYT $TWTR $SH #DPZ #pennystocks #stocks http://t.co/RBfA8LcTJ0
3 Aug 15 15:34:37
DPZ Domino's Pizza Group LTD Day Low http://t.co/tThQMa6G0F $DPZ $IYT $TWTR $SH #DPZ #pennystocks #stocks
3 Aug 15 15:34:34
BX Blackstone Group LP Volume http://t.co/6r893Y3bQg $BX $CELG $IYT $ITB #BX #nasdaq #share
3 Aug 15 15:05:07
@marketmodel cross currents.... $TLT breakout and $IYT breakout; academically, it would appear to be bullish - despite earnings criticism
R Murray MD CFII
3 Aug 15 14:52:22
#Transports #ETF #Bull action regains DMA200 #Dow theory indicates $DIA higher unless a bear reversal $IYT - http://t.co/tI1dCL77TB
IH News Desk
3 Aug 15 14:25:06
$IYT Company Info Updated Monday, August 3, 2015 5:10:42 PM $VXX $XLE $EWJ $EBAY http://t.co/Ht0kOES2xd
IH News Desk
3 Aug 15 14:25:03
$BIDU Financials Updated Monday, August 3, 2015 5:10:42 PM $IYR $HYG $RSP $IYT http://t.co/qMIAyg1Bnl
Penny Stocks Blog
3 Aug 15 14:08:43
RT @stock_forums: IYT iShares DJ Transportation Average Index Fund Ask http://t.co/JJwEj789M3 $IYT $LNKD $MUX $HD #IYT #pennystocks #trade…
3 Aug 15 13:53:12
RT @macroQmicro: #Transport etf $IYT up holding above LT S/R & 50dma but rejected at topline 17-day megaphone $DJT $MACRO http://t.co/kFt1W…
Jeff Quiggle
3 Aug 15 13:45:19
#Transport etf $IYT up holding above LT S/R & 50dma but rejected at topline 17-day megaphone $DJT $MACRO http://t.co/kFt1WP5UmH
3 Aug 15 13:40:35
KBE SPDR KBW Bank Index ETF EOD Data http://t.co/GVmM0VOnhR $KBE $IYT $MRK $KITE #KBE #stockmarket #stock
Stock Forums
3 Aug 15 13:39:06
IYT iShares DJ Transportation Average Index Fund Ask http://t.co/JJwEj789M3 $IYT $LNKD $MUX $HD #IYT #pennystocks #tradeideas
Stock Forums
3 Aug 15 13:35:36
ECA.TO EnCana Corp. E.P.S. http://t.co/Wva9zMmpui $ECA.TO $IYT $INTC $SHAK #ECA.TO #invest #tradeideas
3 Aug 15 13:17:39
Index/Sector: $DIA, $SPY, $QQQ, $IWM, $XLB, $XLE, $XLF, $XLI, $XLK, $XLP, $XLU, $XLY, $XRT, $XLV, $IYT http://t.co/Obu80YCmBu
3 Aug 15 12:51:10
XLU Utilities Select Sector SPDR Prev Close http://t.co/N90Lxa7lzj $XLU $IYT $SPXL $IBB #XLU #invest #stockmarket
3 Aug 15 12:50:23
WMIH WMI Holdings Corp. Day Low http://t.co/umAMKe9vmf $WMIH $IYT $DRN $GG #WMIH #invest #invest
3 Aug 15 12:48:09
TZA Direxion Daily Small Cap Bear 3x Shares Bid http://t.co/K3MhVADhSm $TZA $DUG $NFLX $IYT #TZA #stockmarket #stocks
3 Aug 15 12:48:09
TZA Direxion Daily Small Cap Bear 3x Shares Bid http://t.co/ks982f9H1c $TZA $DUG $NFLX $IYT #TZA #stockmarket #stocks
3 Aug 15 12:48:09
TZA Direxion Daily Small Cap Bear 3x Shares Bid http://t.co/FsFSCdexz8 $TZA $DUG $NFLX $IYT #TZA #stockmarket #stocks
3 Aug 15 12:47:43
TZA Direxion Daily Small Cap Bear 3x Shares Last Price http://t.co/FyfFsOxNt9 $TZA $EA $IYT $ONTY #TZA #tradeideas #share
3 Aug 15 12:45:04
SALT Scorpio Bulkers Inc. Bid Size http://t.co/9uAZUrjzWR $SALT $NDRM $TZA $IYT #SALT #stocks #invest
Stock Forums
3 Aug 15 12:43:12
NEM Newmont Mining Corp. Shares http://t.co/UVFV4MrJIx $NEM $RUSS $SH $IYT #NEM #tradeideas #tradeideas
Stock Forums
3 Aug 15 12:42:33
NETE Net Element International, Inc. Ask http://t.co/DZO7CAqZ2j $NETE $IYT $DRN $BRWC #NETE #invest #pennystocks
3 Aug 15 12:41:34
LNKD LinkedIn Corp. Last Trade http://t.co/2gl6aUhaae $LNKD $NETE $IYT $CAT #LNKD #invest #invest
3 Aug 15 12:41:34
IYT iShares DJ Transportation Average Index Fund News http://t.co/BvEwklonEy $IYT $WB $VRX $BIIB #IYT #tradeideas #stocks
3 Aug 15 12:41:12
IYT iShares DJ Transportation Average Index Fund Dividend http://t.co/ZNK8bTlOKk $IYT $CAT $TNA $KRE #IYT #invest #invest
3 Aug 15 12:39:22
GPRO GoPro, Inc. P/E Ratio http://t.co/AXfLbcO3di $GPRO $XBI $CREE $IYT #GPRO #nasdaq #investing http://t.co/Csk7miIhta
3 Aug 15 12:38:34
HACK PureFunds ISE Cyber Security ETF Investor Opinions http://t.co/qTDIoyugtX $HACK $IYT $NUGT $DUG #HACK #pennystocks #tradeideas
3 Aug 15 12:38:29
GPRO GoPro, Inc. P/E Ratio http://t.co/iUUl4keXVR $GPRO $XBI $CREE $IYT #GPRO #nasdaq #investing
By  +Follow June 21, 2013 9:45AM



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