The ProShares and Direxion leveraged ETF’s have been extremely popular so it comes as no surprise they continue to launch new leveraged funds. Yesterday, ProShares added 4 new leveraged international ETFs that seek to capture 2x the daily performance of the underlying benchmarks. Here are the funds:
ProShares Ultra FTSE/Xinhua China 25 (NYSE Arca: XPP)
ProShares Ultra MSCI Japan (NYSE Arca: EZJ)
Does the launch of these 4 funds indicate a top approaching in international and emerging market ETFs. Perhaps, but I wouldn’t make large bets on that just yet. Most markets remains in strong up trends. I’d expect these ETF’s to be just as popular as the inverse versions were, I’m just wondering why they didn’t launch them in pairs at the same time. The inverse counterparts of the above ETF’s have been around for nearly two years. Here are the inverse versions:
ProShares UltraShort FTSE/Xinhua China 25 (NYSE Arca: FXP)
ProShares Ultra MSCI Japan (NYSE Arca: EWV)
What interests me more will be these inverse ETF’s once the markets go into rally correction mode. They have been slaughtered and once they break their downtrends, should provide big profits.
There has been much concern of late that the rising rates machine is in motion and the Fed is out of bullets to do much about it. The Fed has done it’s best to keep rates artificially low with 100 of billions in treasury purchases, but it’s becoming clear it isn’t working as yields continue to rise. That spells trouble for the housing market and the overall economy. I don’t think there is any question that a trend up in rates across the board will be a major theme in the coming years.
There are a few ways to profit from this trend. One of course is to buy gold, while the other is to short treasuries. The ProShares UltraShort 20 Yr Treasury ETF (TBT) has performed extremely well in this environment and if you want more bang for your buck, leveraged ETF extraordinaire Direxion Funds recently launched the Direxion Daily 10-Year Treasury 3x Shares (TYO) and the Direxion Daily 30-Year Treasury Bear 3x Shares (TMV) ETFs.
I’d stay away from the 10 Yr ETF since it only trades 3k shares a day right now, but the 30 yr ETF is increasingly liquid and trades on average over 50K shares a day.
The chart reveals a healthy pull back late last week after a fairly strong 7 year auction alleviated fears of oversupply, but those fears returned a bit today. If TMV pulls back to the upward trend line in the coming days, I may jump in for a trade.
