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What to Do During this Tapering Temper Tantrum?

By  +Follow June 21, 2013 9:45AM
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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.


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Results for IYT
Nicholas
6 Mar 15 11:36:31
RT @Couzin_Vinny: WOW every single $SPY Sector is red + $IYT $IYR $IBB $XBI $GLD $XHB - did I mis anything? Damn. http://t.co/bwX3s1sulD
Cousin_Vinny
6 Mar 15 11:35:25
WOW every single $SPY Sector is red + $IYT $IYR $IBB $XBI $GLD $XHB - did I mis anything? Damn. http://t.co/bwX3s1sulD
equities.com
6 Mar 15 10:20:20
Are Stocks Looking at New Highs or Pullback From Here? $socl $PBW $yhoo $IYT $iwm http://t.co/TKcalx7WaU
Toni Turner
6 Mar 15 10:10:59
$DIA unhappiest camper, percentagewise, of three major indices. $IWM finally weakening, as is $IYT. Both act as directional clues for market
DWreck
6 Mar 15 10:00:41
RT @metamacro: $IYT Important- use FA/TA NOT the neo-charlatan TA via $TWTR #DowTheory Is #fundamentals! TA's equivalent Columbus sayn he i…
The The The Feed™
6 Mar 15 09:56:55
$IYT Important- use FA/TA NOT the neo-charlatan TA via $TWTR #DowTheory Is #fundamentals! TA's equivalent Columbus sayn he invented America!
Kilo Romeo
6 Mar 15 09:36:11
Commented on StockTwits: compare $IYT vs $XLI for a better perspective. imo http://t.co/tfukGLlDER
Michele Schneider
6 Mar 15 07:29:27
Keep eyes on $IYT-been a sleeper and yet held the 50 DMA like a champ
Alan Farley
6 Mar 15 07:24:36
Stll in $IYT. I'll do happy dance if it get back to mid week highs.
Jimmy Walsh
6 Mar 15 06:56:55
$IYT daily sitting on the 50 day and weekly on the 10 and 20 day
Alan Farley
6 Mar 15 06:39:56
$IYT long my early proxy for gap fill attempt. t-i-g-h-t stop
Alan Farley
6 Mar 15 05:14:42
Watching the transports. Higher low = breakout, Rollover to range support = other indices follow. $IYT $DJTA http://t.co/9dw2MFIsB5
SmallCaps
5 Mar 15 18:37:04
Review of Timothy Sykes book: An American Hedge Fund: http://t.co/AKjszqurh3 $RFMD $IYT $MERC $GASL $COV $RH
WallStreetConsensus
5 Mar 15 17:47:37
Index/Sector $DIA, $SPY, $QQQ, $IWM, $XLB, $XLE, $XLF, $XLI, $XLK, $XLP, $XLU, $XLY, $XRT, $XLV, $IYT http://t.co/JNnKKjsXjU
FollowBackFest ♪
5 Mar 15 12:01:04
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
The The The Feed™
5 Mar 15 11:36:42
$SPY ⚠️ The The The Market Internal $SMH lookn like a "false break-out" additionally $IYT blah! @allstarcharts any thoughts? [a serious ?]
Sheldon McIntyre
5 Mar 15 08:52:49
RT @seeitmarket: Can The Market Regain Its Momentum? Keep An Eye On These Charts: http://t.co/OGpd4DaHIs by @ATMcharts | $SPY $IYT $XRT
Stuart A. Brown
5 Mar 15 08:52:49
RT @chessNwine: NEW POST: Delta Skidding Off the Topping Pattern http://t.co/1Nqb74WKga $DAL $IYT $XAL
Venky Srinivasan
5 Mar 15 08:51:32
"@chessNwine: NEW POST: Delta Skidding Off the Topping Pattern http://t.co/0b4fiQebYq $DAL $IYT $XAL"
Chess
5 Mar 15 08:50:50
NEW POST: Delta Skidding Off the Topping Pattern http://t.co/1Nqb74WKga $DAL $IYT $XAL
Market Int Center
5 Mar 15 06:13:29
iShares DJ Transportation Average $IYT Trading Near $160.76 Support Level ( http://t.co/SJa89ju4sS )
TalkMarkets
5 Mar 15 05:39:03
Index Windex $DIA $OEX $IYT $GLD http://t.co/VSGXFBs0UM
SmallCaps
5 Mar 15 05:29:12
Review of Timothy Sykes book: An American Hedge Fund: http://t.co/AKjszqM28B $RFMD $IYT $MERC $GASL $COV $RH
The The The Feed™
5 Mar 15 04:30:08
Dow Theory giving warning signal. What to sell http://t.co/y7qR47PIsx via @CNBCPro $DIA $IYT
SmallCaps
5 Mar 15 00:51:14
Review of Timothy Sykes book: An American Hedge Fund: http://t.co/AKjszqM28B $RFMD $IYT $MERC $GASL $COV $RH
Joseph G
5 Mar 15 00:37:21
TEAM 112 ALERT: DOW TRANSPORTS $IYT have diverged from Dow Industrials $DIA despite cheap gas. I smell something!
Peak News ★
4 Mar 15 19:14:20
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Real News *
4 Mar 15 19:10:20
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Barry
4 Mar 15 19:08:58
RT @seeitmarket: Can The Market Regain Its Momentum? Keep An Eye On These Charts: http://t.co/OGpd4DaHIs by @ATMcharts | $SPY $IYT $XRT
NeoSolomon
4 Mar 15 19:05:57
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
WallStreetConsensus
4 Mar 15 19:03:14
Index/Sector $DIA, $SPY, $QQQ, $IWM, $XLB, $XLE, $XLF, $XLI, $XLK, $XLP, $XLU, $XLY, $XRT, $XLV, $IYT http://t.co/CHcDhqWsMN
Probability Wave
4 Mar 15 18:57:29
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
See It Market
4 Mar 15 18:54:00
Can The Market Regain Its Momentum? Keep An Eye On These Charts: http://t.co/OGpd4DaHIs by @ATMcharts | $SPY $IYT $XRT
TalkMarkets
4 Mar 15 17:06:59
Index Windex $DIA $OEX $IYT $GLD http://t.co/VSGXFBs0UM
nosGOZZ
4 Mar 15 16:05:54
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Baidu Planet ●
4 Mar 15 15:58:27
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Apple Reporter ●
4 Mar 15 15:55:02
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Google Investor ♦
4 Mar 15 15:52:58
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Matrix Markets $
4 Mar 15 15:34:57
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Financial Controls ۩
4 Mar 15 15:01:18
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Matrix Control ‹‹‹
4 Mar 15 12:53:35
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Osprey Flyer ^v^
4 Mar 15 12:39:52
RT @BoomDoomEconomy: Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ …
Jeff Quiggle
4 Mar 15 12:06:29
$FED Beige Book: Economic activity continues to expand with some slowdowns re weather & port strike http://t.co/si0wRnpnX9 $IYT $DJT $MACRO
Boom Doom Economy ♦
4 Mar 15 11:52:46
Boom Doom Market Report Bull or Bear 2-28-15? $AAPL ↑ #Copper ↓ $DIA ↑ $FXI ↑ $GLD ↓ $IBB ↑ $IWM ↑ $IYT ↑ #Oil ↓ $QQQ ↑ $SPY ↑ $TLT ↑ #USD ↑
The The The Feed™
4 Mar 15 11:33:10
$IYT down ................. notable!
Market Int Center
4 Mar 15 06:53:25
Potential iShares DJ Transportation Average $IYT Trade Targets 2.72% Return ( http://t.co/RE79fvz1qx )
Joseph G
3 Mar 15 21:38:14
TEAM 112 ALERT: DOW TRANSPORTATION AVG not confirming DOW INDUSTRIALS AVE! $IYT headed south and 5ema in rear view mirror.
FollowBackFest ♪
3 Mar 15 19:53:52
RT @MatrixMarkets: Dow Jones Transportation Avg Yet to "Confirm" DJ Industrials All-Time High -0.74% YTD $IYT $DIA #Dow #USA #economy http…
Matrix Control ‹‹‹
3 Mar 15 19:21:36
RT @MatrixMarkets: Dow Jones Transportation Avg Yet to "Confirm" DJ Industrials All-Time High -0.74% YTD $IYT $DIA #Dow #USA #economy http…
NeoSolomon
3 Mar 15 18:26:46
RT @MatrixMarkets: Dow Jones Transportation Avg Yet to "Confirm" DJ Industrials All-Time High -0.74% YTD $IYT $DIA #Dow #USA #economy http…
				
				
By  +Follow June 21, 2013 9:45AM
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