ETF Swing Trading & ETF Investing Online

My Last Post

2008-01-04T13:33:00.000-08:00

I accepted a position as a trader for a mutual fund company so I will no longer be posting to this blog.

My colleagues at the ETF Updater will continue to manage the informational service and are extremely are familiar the ETF trading and ETF investing methodologies.

My colleagues will be establishing two additional separate blogs.

One blog focuses on Swing Trading ETFs (http://swingtradingetfs.blogspot.com/) and the other blog focuses on ETFs and investing strategies (http://etfinvest.blogspot.com/).

Swing Trading ETFs (http://swingtradingetfs.blogspot.com/ )

- Educates readers about swing trading

-Provides ETFs exhibiting buy and short sell swing trading patterns ready to make a high probability move

-Has an educational book to teach individuals and experienced traders the details about how I swing traded ETFs.

ETF Investing – The Best ETFs and the Worst ETFs (http://etfinvest.blogspot.com/ )

Educates Investors about different ETFs (Exchange Traded Funds) and provides a subscription service for investors seeking investment strategies and ideas. The informational service takes a portfolio approach along with hedging strategies to limit adverse moves in the market.

I've enjoyed posting and interacting with you!

All the best,

Michael Matousek, CMT

Weekly Economic Recap

2007-12-29T19:16:00.000-08:00

It was a Holiday shortened week. On Thursday, the November Durable Goods came in lower at 0.1% versus 2%. Then on Friday, the big news was the dissapointing twelve-month low for New Home Sales in November at 647k versus 717k, a drop of 9% from the previous month.

The major indices finished the week lower:
S&P500 -0.40%
Dow Jones -0.63%
Nasdaq -0.65%
Russell 2000 -1.76%

The US Dollar closed lower at 76.218 and gold finished the week at $842.70, up $27.30 on the lower dollar and the tragic events in Pakistan.

To look at next week's economic calendar click here.

Amaury

Commodity ETFs - New Investing ETN

2007-12-28T05:44:00.000-08:00

Let me start by saying I am biased: I love commodities.

I own several natural resources funds, gold and silver companies, and GLD. I love the fundamentals and the diversification they offer, so I am always looking for new ways to get exposure. And I believe I just found it: The Rogers International Commodity Index, (symbol, RJI, http://www.elementsetn.com/ProductsPage.aspx).

This new index is comprised of 36 commodity futures contracts: 44% energy, 34% agriculture, and 22% metals. Keep in mind, RJI is an Exchange-Traded-Note, meaning, it is a debt security with market and issuer risks, it matures in 2022 and is traded on the American Stock Exchange.

Through one security, I can gain exposure to all commodities and reduce my portfolio correlation and risk profile.

I urge you to visit the website in order to find out more and to do your own due diligence before investing!

Amaury
Contributing Author, ETF Updater
http://etfupdater.com

Best Days to Invest

2007-12-27T10:24:00.000-08:00

For the past 10 years research suggests Mondays and Tuesdays are the most consistently bullish days of the week for the Dow Jones Industrial Average and Thursday and Friday are the most bearish.

How can market participants take advantage of this phenomenon?

To increase the probability of success, try to time your trading methodology so it corresponds with the bullish/bearish day phenomenon. Additionally, the study researched large cap stocks, so I would keep a list of the large cap ETFs I’m interested in handy.

For starters here is a few:

Symbol - Description

DVY - iShares DJ Select Dividend Index
IVE - iShares S&P 500/Barra Value
IWD - iShares Russell 1000 Value Index
IWF - iShares Russell 1000 Growth
DIA - Diamonds Trust, Series 1
IVV - iShares S&P 500 Index Trust
IVW - iShares S&P 500/Barra Growth
IWB - iShares Russell 1000 Index Trust
OEF - iShares S&P 100 Index Fund
PWB - Power Shares Dynamic Large Cap Growth
SPY - S&P Depository Receipts

This doesn’t mean every Thursday & Friday are good days to enter positions at favorable prices, but knowing a little extra statistical data can assist Portfolio Managers, Swing Traders and Investors manage risk better and increase their P&L.

Keep in mind, this is not investment advice and should be used for educational and informational purposes only. The bullish/bearish phenomenon, as with any trend can change at any time.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

We have a new format for our ETF Trading Services.

2007-12-27T06:40:00.000-08:00

Good Morning:

We think you will enjoy our new formats.

Swing Trading Playbook - Subscribers Only
Sample - http://etfupdate.blogspot.com/

ETF Updater "Lite" Free Swing Trade Patterns
http://swingtradingetfs.blogspot.com/

ETF Investor - Information for the ETF Investor
http://etfinvest.blogspot.com/

Be sure to save each one as a favorite for easy access!

Michael Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com

This Week's Economic Data

2007-12-22T07:43:00.000-08:00

This was a light week for economic data. The Empire (NY) Manufacturing Index for December came in lower at 10.3 versus 20.0, the Philly Index also disappointed at -5.7 versus 6.0 later on the week and the now irrelevant final revision for 3Q GDP was reported, in-line, at 4.9%.

Investors received a mild positive on Friday, with Personal Spending for November higher than expected at 1.1% versus 0.7% and the Core PCE Deflator was also higher at 2.2% versus 2% year-over-year. Don't tell the Fed and Santa!

The major indices finished the week higher:

Russell 2000 +4.17%
Nasdaq +2.13%
S&P500 +1.13%
Dow Jones +0.83%

The US Dollar finished slightly higher at 77.72 and gold finished the week at $815.40, up $17.40 on renewed inflation worries as oil rallied up $2.06 on the week.

Check out next week's calendar at:
http://www.bloomberg.com/markets/ecalendar/index.html

ETF Swing Trading and Investing – Capitalize on the 2 Day Down Phenomenon

2007-12-21T11:07:00.000-08:00

Helping Swing Traders, Investors and Institutional Market Participants Increase Profitability

Past research suggests market participants can increase there probability of determining a short term turning point by tracking the performance of the Dow Jones Industrial Average on Fridays and the following Monday.

Past history shows if the Dow had a down Friday and a down Monday there is a negative bias in the market and frequently corresponds to some short or intermediate term market tops.

Over the past twelve years this phenomenon occurs on average about ten times per year and has an average decline of 5.5%. If the market is in a downtrend the average decline is amost double!

Additionally, it seems, if the pattern develops after an extended downward move a short term bottom may be in the works.

How can market participants capitalize?

Learn more about trading and investing by signing up for our free educational trading material at http://www.etfupdater.com/requestinformation.php.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading ETFs with Bullish & Bearish Statistical Inferences

2007-12-21T07:43:00.000-08:00

For the past 10 years statistical research suggests Mondays and Tuesdays are the most consistently bullish days of the week for the Dow Jones Industrial Average and Thursday and Friday are the most bearish.

How can market participants take advantage of this phenomenon?

To increase the probability of success, try to time your trading methodology so it corresponds with the bullish/bearish day phenomenon. Now, this does not mean every Thursday & Friday are good days to enter positions at favorable prices, but knowing a little extra statistical data can assist Portfolio Managers, Swing Traders and Investors manage risk better and increase the bottom line.

Keep in mind, this is not investment advice and should be used for educational and informational purposes only. The bullish/bearish phenomenon, as with any trend can change at any time.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Ways to Capitalize from the ETF Phenomenon

2007-12-17T20:04:00.000-08:00

As ETFs have become more and more popular, I wanted to bring to our readers' attention some indirect ways to invest in this growing trend.

Think about this; every time you buy or sell an ETF, there is a distributor, custodian, commission, and exchange that benefit from the transaction. While the following stocks have their own investment risks, I hope the symbols below can provide you with a starting point for investment ideas and profits:

This is not a solicitation or offer to purchase any securities. It is for informational purposes only.

AMTD
ETFC
SCHW
BCS
DB
MER
MS
TROW
WSDT
BK
STT
SEIC
GFIG
NYX
NDAQ
MF

Amaury
Contributing Author, ETF Updater
http://etfupdater.com/

Swing Trading and Day Trading ETFs – Large Position Sizes Are Not Absolutely Necessary

2007-12-17T19:08:00.000-08:00

Contrary to popular belief you don’t need to trade big share sizes to make a fair amount of money in the market.

In addition to trading for a living, I manage subscription based educational service called the Swing Trade Playbook. The idea behind the Playbook and this blog is to educate individuals about ETFs, trading, swing trading and day trading.

Every weekday night my Swing Trade Playbook outlines my trading plan for the next trading day. By doing this, I allow individuals to “peek over my shoulder” and see tomorrow's trading plan today!

Today’s lesson, you don’t need to trade large size to earn a good living swing trading. The image below shows the positions my Swing Trade Playbook shared with subscribers about one week ago. As you can see the largest position is only 1,136 shares and if you were to enter the positions your unrealized P&L would be pretty close to $21,000 with an initial risk of approximately $7,000 (a 3 to 1 reward to risk ratio).

I wanted to show this since a potential subscriber emailed and asked how I can make any money trading small share sizes.

If you would like to learn more about my Swing Trade Playbook go to my website http://etfupdater.com.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading the Best and Worst ETFs

2007-12-17T08:36:00.000-08:00

This weekend an individual wanted to learn how we trade ETFs.

I’ll start by saying there is no one Holy Grail in trading and to be successful traders only need to understand a couple of strategies.

The core strategy behind my method is to purchase ETFs during pullbacks and short ETFs during rallies. I feel my method offers less risk than traders buying breakouts and selling break downs since the majority of the trades are entered during either “oversold” or “overbought” conditions.

As many of my subscribers noticed I don’t have many breakout plays in my ETF Swing Trade Playbook and here is why:

Most experienced market participants have heard the phrase, 'beginners buy breakouts, professionals buy pullbacks".

Contrary to the “inexperienced” traders’ belief, the majority of breakouts are unsuccessful! Sure, it is easy to look at a chart and identify the best breakout points that happened in the past, but what most inexperienced traders fail to notice is how many breakouts fail – I assume this is why most inexperienced traders are unsuccessful.

Breakouts, the successful ones, don’t happen as often as people think. Realistically, there are only a few times each year an individual sector actually has the opportunity for a good breakout to exist.

Breakouts have greater risk. If a trader believes in trends, support and resistance levels the actual price in which the trend is broken, the stop loss price, is much farther away from the entry price on breakout trades. Therefore, to give the trade the opportunity to "work" the “wiggle” or stop loss level has to be larger than the “wiggle” for pullback strategies. This means greater risk with each trade - why would any astute market participant want to take on additional and unnecessary risk?

The majority of newsletters generally focus on breakouts, my Swing Trade Playbook focuses on pullbacks and rallies. Subscribing to my informational service not only assists subscribers diversification of trade discovery tools, but subscribers get see the trades I anticipate doing the day before I attempt the trade. This included my original and uncommon trading methodologies.

Sure, I do trade some breakouts, but they are not my core strategy since, technical analysis research has shown breakout type strategies fail more often than succeed. Generally, I wait for the breakout to happen, confirm itself and then I buy the pullback.

I have an educational book called Swing Trade Fundamentals it details the how and why concerning finding trades, determine the correct amount to shares to purchase, determining entry points, exit points and much more.

If you would like to learn more about swing trading, day trading and investing feel free to sign up for our free weekly swing trading educational newsletter at http://etfupdater.com/ or click here.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Best & Worst ETFs

2007-12-16T20:04:00.000-08:00

Best Performing ETFs for Friday December 14, 2007

Energy, specifically, clean energy and commodities (Gold) were the only two sector ETFs I track that were positive on the day.

PBW PwrShr WilderHill Clean Energy 1.55%
GLD StreetTRACKS Gold Trust 0.15%

Worst Performing ETFs for Friday December 14, 2007

It seems the heavy selling was in the real estate and banking ETFs.

KBE SPDR Series KBW Bank -4.45%
ICF iShares Cohen & Steers Rlty Ma -3.62%
RWX SPDR DJ Wilshire Intl Real Est -3.43%
RWR SPDR DJ Wilshire REIT -2.93%
VNQ Vanguard REIT ETF -2.89%

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Traders' Market Update

2007-12-15T12:20:00.000-08:00

The BIG story of the week was the FOMC meeting on Tuesday...and the market's disappointment in 'only' 25 bps cuts on the Fed and discount rates. The Fed then surprised investors the next morning, in a coordinated plan with other global central banks, by injecting up to $40 billion in reserves into the financial markets in order to improve liquidity.

November PPI came in higher at 3.2% versus 1.5% (core at 0.4% versus 0.2%) on Thursday, and November CPI at 0.8% versus 0.6% (core at 0.3% versus 0.2%) on Friday. A better than expected Advanced Retail Sales (1.2% versus 0.6% expected in November) failed to impress investors, especially as reports that online sales for November and December are running below the 26% pace of a year earlier.

The major indices finished the week lower:
Dow Jones -2.10%
S&P500 -2.44%
Nasdaq -2.60%
Russell 2000 -4.02%

The US Dollar rallied 1.5% as investors pared down expectations for further rate cuts on the back of the biggest increase in consumer expectations in two years. Gold finished the week at $798, down $2.20.

Check out next week's calendar at:
http://www.bloomberg.com/markets/ecalendar/index.html

Amaury
Contributing Author, ETF Updater
http://etfupdater.com/

ETF Swing Trading - Good or Bad? Depends Which Side of the Market You’re On!

2007-12-14T13:15:00.000-08:00

The ETF Sector Rotation Strategy (our strategy for longer term investors) lost ground today, but the positions are still in positive territory.

The Swing Trading Playbook has been hitting it out of the park all week. We had very few trading signals since the positions entered earlier in the week are working great. The Playbook is up about 4.5% for the week and holding a few unrealized gains over the weekend and into next week.

It looks like Monday may be the time to hedge the portfolio or start ringing the register on few positions.

Here is a screen shot of the open positions for the Swing Trade Playbook. As you can see, huge positions are not necessary to make money swing trading. The key this week was keeping the losses small and letting the winners run.

To learn more about how you can benefit from us visit http://etfupdater.com/.

Have a good weekend!

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

ETF - Professional Technical Analysis and Money Management Organizations

2007-12-13T20:53:00.000-08:00

I believe, to stay on top of their game, money managers must constantly evaluate new market concepts, revisit old trading journals and network with their peers.

To accomplish this task, I belong to a few professional organizations. One of which is the Market Technicians Association (http://mta.org/) and I joined for a few reasons:

1. To learn more about technical analysis to improve my personal trading
2. To meet other professional Market Technicians
3. To help promote the use of Technical Analysis

To Learn more about the MTA click here and to learn more about what a market technician does click here.

Another organization I belong to is the National Association of Active Investment Managers (NAAIM) to visit the organizations website click here.

Each organization has a different focus, but together, they combine the knowledge, insight and camaraderie I feel a money manager needs to succeed.

If you have any questions or would like my opinion about how you can benefit, feel free to contact me. For our contact information click here.

Michael Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

ETF Swing Trades - Swing Trading Playbook

2007-12-13T13:23:00.000-08:00

Contrary to a lot of individual’s beliefs, traders using a swing trading approach do not need to make trades everyday to be successful.

For example, the image below shows the ETF symbols that triggered a possible short sell signal (we emailed this list to subscribers to the day before a swing trade signal could be generated). If you are following the markets and our posts closely, today was the first time any of the ETFs had a net positive day since the signal was generated. This is good, since the ETF Swing Trade Playbook showed these as a short sell opportunity. That means if they go down we were correct in our directional bias.

Here are the ETFs that didn't get stoped out since the "playbook" was issued on December 10, 2007.

If you want to know what ETFs and swing trades I'm planning for the next trading day visit us at http://etfupdater.com/. We have a trial offer for $19.99 until the end of the year, then it goes to $49.99 per month.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Investor Sentiment

2007-12-12T10:56:00.000-08:00

Investor Sentiment is important for traders when determining a directional bias for their swing trades. Remember, swing trading consists of trades generally last more than a day and can continue for a few weeks if the trader’s bias remains constant.

It is even quite common for institutional traders to use the bias generated from investor sentiment analysis to determine the type of scalping trades they make. For instance, if the investor sentiment bias is bearish, the traders generally trade the market on intraday signals from the short side.

Investor sentiment isn’t discussed much in the mainstream media, but it is an important tool in determining market bias. I’m not sure, but maybe it’s not mentioned because it doesn’t have “sizzle” or is as “black and white” as a moving average. Or, perhaps, it’s due to the fact that it is a “smart money” indicator and the “dumb money” wants avoid learning how their emotions fueled the huge turnaround they recently missed. Whatever the reason, the less people educated about market psychology the better the market becomes for the informed trader.

“Smart Money” or institutional investors do the difficult work and look deep at the internals of the market while everyone else waits for the media to explain it. Since it is difficult to find the CBOE VIX or the Put/Call ratio from one source, I need to dig through multiple web sites to determine the current readings of each one.

Here is a site that has a few of the indicators I mentioned http://www.schaeffersresearch.com/.

Robert J. Ogilvie
CIO and Head Trader
http://www.skyboxtrading.com/

Commodity ETFs – Should They be in Your Portfolio

2007-12-12T04:57:00.000-08:00

My friend Mike asked me a few weeks ago to contribute his blog with my thoughts on commodities, especially the precious metals since I truly believe investors can benefit from some exposure to commodities as an asset class in a well diversified portfolio.

There have been many studies and research projects about how some allocation to commodities will increase your return and lower your risk over the long term. How much depends on one's risk and comfort level. 5-10% may be more than enough for most, while most aggressive investors will be comfortable with 40-50%. Such ETFs as GLD, SLV, CEF, GDX and others have made it relatively easy for an individual to get exposure. Sure, you can buy a resources mutual fund (but why pay the managers above average fees) or individual mining companies directly (but why worry about operational risk, management risk, currency risk, geopolitical risk, environmental risk) when you can get exposure to the asset class through ETFs.

When I first started trading metals in the mid 1990s, I had to buy gold coins at the local dealer, but now the with the ease of owning commodity ETFs along with the diversification they offer, any investor would be foolish not to own commodity-related ETFs.

If you are new to investing, start by accumulating on a pullback and build a position over time (but be wary of your commission costs) and rebalance at least yearly, if not quarterly, depending on your risk tolerance. This world is too global and offers too much opportunity not to have some exposure.

Amaury
Contributing Author, ETF Updater
http://etfupdater.com

Today's ETF Action Action and Yesterday's Playbook

2007-12-11T13:41:00.000-08:00

Here is an excerpt from my swing trade playbook I sent out today. If you are interested in learning gaining access visit http://etfupdater.com/ :

This was a great day for subscribers that get a glimpse of my trading plan!

As you probably already learned the fed cut rates by .25 basis points. In my opinion, I thought they should have cut by .50 basis points and from the market’s response, I think the majority of market participants felt the same way.

As many of you know, for the past few days I’ve been posting how the market has been rising on low volume (remember low volume moves to the upside are suspect), that I’m keeping the portfolio light and how there was more risk to the downside than the upside.

As I filter through the ETFs, there are no setups for tomorrow’s playbook because of today big move, so I thought I would send a sample yesterdays playbook and how much each trade is in the money.

Tomorrow will be a day to sit on my hands, let the positions work and mitigate any risk.

The image to the right is what I sent to subscribers last night. It shows the direction I attempt to play, the entry price that the ETF has to trade at to trigger an entry signal, the average volatility of the ETF and how many shares I anticipate trading.

The image below shows the trades that were triggered and how many points they are “in the money” (maximum for the day). Basically, you can multiply the “In Money” column by how many shares you would have purchased. Click on the image to enlarge it.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading and Day Trading, Unknown and Overlooked Differences

2007-12-10T07:23:00.000-08:00

I've been asked numerous times, what do Swing Traders do and how are they different than Day traders. First, I should start off by saying there isn't one best way to trade, but it seems almost everyone has an opinion about which way they feel is best.

In the past I would either day trade or swing traded exclusively, but now 90% of my trades are swing trades and the other 10% are day trades. My experience as taught me that combining the two styles offers me the opportunity to capitalize on different market opportunities other traders may pass up.

There basic differences between day trading and swing trading are:

o Time in Trade
o Risks
o Margin Advantages

I've been asked numerous times, what do Swing Traders do and how are they different than Day traders. First, I should start off by saying there isn't one best way to trade, but it seems almost everyone has an opinion about which way they feel is best.

In the past I would either day trade or swing traded exclusively, but now 90% of my trades are swing trades and the other 10% are day trades. My experience as taught me that combining the two styles offers me the opportunity to capitalize on different market opportunities other traders may pass up.

There basic differences between day trading and swing trading are:

o Holding Periods
o Risks
o Margin Advantages

Time in Trade

Swing Traders generally hold positions for days or weeks and the holding period is generally determined from the stocks trend as opposed to the market's hours for day trades.
Day traders generally start and end the day without any positions in the account. In doing so, the risk of holding overnight positions that open adversely to the trader is mitigated, which is true, but there are a few other risks many day traders don't think about.

Many people think day trading is less risky since they do not hold positions overnight. In my opinion, this is far from reality since most of the day trading proponents never talk about "commission risk".

Commission Risk
The risk that the cost of commissions can significantly impact the traders account. I've been in this business quite some time and have seen individuals gross $250,000 per year trading and pay $300,000 in commissions producing a net loss of $50,000 for the year. So, if you are going to day trade, keep in mind the risk least talked about, COMMISSION
RISK.

Opportunity Risk

The risk that a better opportunity may present itself after a decision has been made. Traders need to realize if they are going to swing trade, which generally requires more capital than day trading they are more susceptible to opportunity cost. I can find quite a few swing trades per day, but since capital is limited I need to reduce my opportunity risk by screening all possible swing trades for the best opportunities.

Margin (What is Margin)

Day trading does give some traders an advantage, buying power. If an account qualifies to be a day trading account the broker dealer may offer the trader 4 to 1 intraday leverage instead of the industry norm of 2 to 1. Keep in mind, depending on the day traders experience and profitability this can help traders produce greater returns or losses.

Feel free to send me an email if you have any questions.

Until next time take care and trade smart.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com

Why the Media Has Short Squeezes Wrong.

2007-12-08T20:56:00.000-08:00

Lately, the media has been talking up a storm about stocks with a high short interest proposing hedge funds are in trouble and need to cover. I find this a bit far from reality since most funds use capital and derivatives more efficiently than the average person thinks.

They, the media, or the so called professional being interviewed, seem to think any stock with a relatively high short interest and a trading day with a high positive net change is a short squeeze. Sometimes this is the case, but not always. Especially for stocks that are optionable.

You see, if a market participant is short an optionable stock and the stock starts to rally, to hedge themselves or, get delta neutral the participant can purchase an option instead of covering the stock in the open market. In doing so, the market participant does not add fuel to the current rally of their short position. Therefore, they can still hold the stock short and not lose any capital.

The theory of the media’s short covering rallies can be valid if the security in question is not optionable. In this situation, the hedge fund does not have derivatives to mitigate risk and to stop the trade from depreciating in value the fund will need to cover the stock in the open market - adding fuel to the rally in question.

Unfortunately, the stocks they were talking about were optionable so I would be suspect about calling that particular rally a short squeeze.

If I were to play the short interest / short squeeze trading game for either a daytrade or swing trade before I can make an investment decision I would need to the following data points increase the probability of a making a wise decision.

1st Gather the data for stocks with the highest short interest and days to cover ratios
2nd Filter out the stocks that are not optionable (this increases transparency)
3rd Look at the largest holders of the each stock and determine
Are solid mutual funds with deep pockets and good returns on the year?
Are the large holders of the stocks in question individuals or other hedge funds?

Take care and happy trading.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://ETFUpdater.com

ETFs the “New Stocks”

2007-12-06T08:19:00.000-08:00

To be successful market participants must always strive to keep learning, even participants such as myself. Because of this, I found a new product to trade and they are fast becoming my preferred trading and investment vehicles.

ETFs are a derivative (don’t let that word scare you) of a basket of stocks. They can be designed to track nearly any group of stocks offering investors and traders quick and easy exposure to a specific market, sector or sub sector of the market. They are quickly becoming my trading vehicle of choice since they are less volatile than individual stocks, are not as prone to single company stock risk and liquidity is not an issue (even with ETFs that trade less than one hundred thousand shares per day).

I started trading ETFs, Exchange Traded Funds, around 1999. Over the next few years the variety of ETFs grew considerably. For example, the first ETFs to really catch the public’s eye were “main stream” ETFs were mostly index tracking products for the Nasdaq 100 (QQQQ), S&P500 (SPY) and the Dow Jones Industrial (DIA) indexes. Now the makers of the ETFs even make ETFs for special strategies.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

ETF Ideas GLD, GDX & UUP

2007-12-06T05:24:00.000-08:00

The US Dollar (measured through the DXY index) bounced from 74.484 on 11/23/07 to 76.413 on 12/05/07 on signs of resilience in the labor market and US economy. I believe it can extend those gains at least through next week and test 78, especially if we get 'good' unemployment data on Friday.

As such, an investor can buy UUP or short GLD and GDX for that trade. GLD topped at $83.63 on 11/08/07 and has hit two lower highs since, on 11/26 and 12/04- failed to recapture the $80 level. Support comes in at $76.50 and $75. GDX needs to hold $45.

Amaury
Contributing Author, ETF Updater
http://etfupdater.com

ETF Swing Trading - Stop Losses and Exits

2007-12-05T14:10:00.000-08:00

It was bound to happen, the market had yet another powerful rally, yet the volume was about 10% less than the average volume. As I said in yesterday’s playbook “generally, when I start to see this many sectors setting up there is a high probability for a bounce, so protect your existing positions”.

The majority of the ETFs I shorted last week and on Monday of this week were either exited with small profits or stopped out with small losses. I still hold a few shorts. All in all, we are up slightly, but it pales in comparison to the amount of unrealized gains we had at the end of yesterday.

For the readers new to swing trading, this is not uncommon and it is a consequence of actively trading. Although, I would much rather be stopped out with small losses than be the market participant holding sitting on large losing trades.

Keep in mind, to make a substantial amount of money each month we need to keep the losses small and let the profitable trades mature. Out of the twenty trading days each month if we can flat fifteen and have five good days we can do quite well.

The US Health Care Sector ETF (symbol, IYH) was triggered as a long entry. It closed in the upper percentile of its trading range and looks like it may have some additional upside tomorrow. Followers of my Swing Trading Playbook should have had about $.27 cents profit in it during the day today.

For a subscription to our FREE swing trading newsletter visit us at http://etfupdater.com/.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

GDX & GLD ETF Update - Gold Miners and Gold

2007-12-05T08:52:00.000-08:00

I would like to introduce a friend and contributing author, Amaury.

Amaury is a personal friend and head trader at an investment management firm. He likes to focus on the commodity sectors within the markets, but more specifically gold and gold mining stocks.

Here is his latest insight:

The market weakness and uncertainty over the last month has created some interesting opportunities in the resources sector, especially in the Canadian junior sector. Those stocks have suffered from tax loss selling, project disappointments (i.e.: NG and the Galore Creek project), and risk-aversion selling from investors preferring large cap, less volatile names or cash. While there are over 3,000 juniors, I really like selling my GLD over $80 and using that cash to add or buy a few beaten down juniors. Of course, stick with the 'best' names- strong management team, good balance sheet, adequate cash, and advanced projects (gold-silver-copper projects in Mexico are my favorite). The fundamentals remain strong for gold and other metals, but the best trade I see right now is to look for companies that are unfairly trading at new lows and hold them over the next 12 months. Investors that can ride the volatility will be better rewarded than owing GLD outright.

Newmont (NEM), which makes up 10% of Gold Miners ETF (GDX), has agreed to sell its royalty assets and other non-core investments to Franco Nevada (FNV on Toronto) a few days ago. I like selling NEM over $50 and using that cash to buy smaller US and Canadian names that have advanced gold exploration projects. I feel this transaction opens the door for an interesting m&a period over the next 12 months.

Amaury
Contributing Author, ETF Updater
http://etfupdater.com/

ETF Investing & Swing Trading - New Swing Trading Tool

2007-12-04T04:53:00.000-08:00

Good morning, the Dow Jones Index futures are down approximately 70 points, the DIA ETF is bid @ $132.55 (yesterday’s closing price was $133.30) and we have been short since Friday.

Most of the money made in the markets generally comes from sitting on your hands and letting your positions work, today we would like to mention a new tool swing traders can benefit from.

Our trader is constantly asked by friends, family and other individuals how he does what he does, what tools he uses, how he uses each tool and if they can watch him trade. Our website http://etfupdater.com/ created a service called the Swing Trade Playbook.

The service allows individuals to get a glimpse of our trading plan BEFORE for the next trading day. We aren't familiar with any other services that let individuals see an actual trader’s plan the day before any trades happen.

The trader's wing trading plan consists of :

- The ETFs He Anticipates Trading Tomorrow (ETF Buy Sell Ideas)
- Both Long and Short Ideas so traders can capitalize if the market goes up or down
- ETF Entry Points
- ETF Exit Points (inital stop loss prices)
- How Many Shares He Anticipates Trading To Balance Each Trades Risk
- Thoughts about the market
- Technical Analysis Ideas

The introductory rate for the service is $49.99 per month. As the subscriber base increases the price will increase to $99.99 per month. We anticipate on raising the price to new subscribers so we can maintain exceptional service for the original subscribers.

For more information visit us at http://etfupdater.com/ or click here.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com/

Swing Trading ETFs - Exhaustion Gap Shorted SMH

2007-11-30T14:50:00.000-08:00

Exhaustion gaps sometimes signal a short term top in the market and today’s market action, the gap open and sell off is almost a textbook exhaustion gap.

An exhaustion gap generally happens after an extended strong upward or downward move.

Here is how they generally work out. The market opens significantly higher than the previous day’s close and continues to rally for a short time right after the open (just enough to suck in the “dumb money”). Next, the market sells off, tries to bounce, but can’t since most of the buyers or people interested in buying have bought over the previous few days (that is why the market appreciated so strongly).

Throughout the day, the market continues to drift lower, but can’t find support until the last hour or so of trading.

If you look at today’s intraday chart it was a textbook example of this type of pattern.

What does this mean? The smart swing traders, recognizing the exhaustion gap, sold a little portion of the long positions that were held overnight and opened a few small short positions to participate in the drift lower.

My disclosure:

I held the long XLU (utilities ETF) position and XLP (consumer staples ETF) and opened a short position with the SMH (semi conductor ETF).

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com

Leveraged ETFs - The Leverage Mix-UP

2007-11-29T20:49:00.000-08:00

I’ve come across many market participants believing if they purchase a leveraged ETF and held it for an extended period of time, the ETF’s performance should double the index or sector it’s benchmarked against.

Please understand this is not the case. The majority seek to provide a 200% DAILY return on the underlying index they track.

Notice I typed “DAILY”!

Noted in the ETF providers prospectus, which I’m sure we all read quite diligently. It is stated the leveraged ETF is designed to double the Daily return, not the total return for time periods greater that one day.

I noticed this while I was helping a hedge fund that trades ETFs quite heavily. The were using the leveraged ETFs to hedge the portfolio and noticed the hedge was not delta neutral. The hedge was actually appreciating more than what the underlying portfolio was depreciating.

So, why does this happen? Why doesn’t it track properly if market participants hold positions overnight? Compounding! Just as we all like compound interest you get the same effect here, except since the ETF can depreciate in price it can work adversely too.

Over time the effect of compounding and leverage can have a significant effect on the total return of the ETF.

Here is an example assuming a $10,000 investment.

Day 1:

The underlying index increases 1%
The leveraged ETF increases 2%

The first day = 200% return, just as we thought, and we outpaced the market, great!

Day 2:

The underlying index decreases 1%
The leveraged ETF decreases 2%

Underlying Index Value: $9,999 (An increase of $100 and then a decrease of $101 on day two)

Leveraged ETF Value: $9,996 (an increase of $200 and then a decrease of $204)

As you can see the index decreased in value $1 over two days and the leveraged ETF decreased $4 over the two days (this is four times the cumulative index loss as opposed to two times the loss).

Hopefully, I’ve explained this in detail enough for you to see how over a longer period of time the cumulative percentage change of the leveraged ETF has the ability to vary significantly from the underlying index.

Here are a few popular Leveraged ETFs:

QLD
DDM
SSO
MVV
SAA
UWM

If you would like to learn more about leveraged ETFs visit my home page http://etfupdater.com or http://proshares.com.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://etfupdater.com

Financial ETFs - Today's Hot Sector

2007-11-28T13:46:00.000-08:00

The Fed’s “jawboning” seems to have helped the market over the past few days, but only time will tell if it is enough to keep the economy from going into recession.

Today, as of this writing the Dow is up about 380 points or approximately 2.93% and the S&P 500 is up about 2.9%. This is the largest one day percentage gain all year. I don’t believe we are out of the woods quite yet so I wouldn’t load up on speculative sectors or margin just yet.

The financial ETFs (Exchange Traded Funds) XLK, IYG, IAT & IAI are the strongest up 5% plus and today’s price action is indicating one of two outcomes. Either Wall Street thinks the anticipated fed rate cut will be the subprime solution or most investors are having short term memory loss concerning the environment of our financial sector. I’m not sure what they are thinking, but I seriously doubt in two days the financial issues are resolved.

Again, only time will tell.

Our portfolio is only 50% invested on the long side and our model still signals defensive ETFs are the place to be. If you would like to learn more about our defensive stance, an ETF update, our swing trading picks or our model portfolios visit http://etfupdater.com.

Our most recent addition to the portfolio was XLU. This energy ETF provides exposure to companies involved with water and electrical power along with natural gas distribution industries.

Mike Matousek, CMT
Portfolio Manager, ETF Updater

http://etfupdater.com

How ETF Sector Rotation Strategies Can Outperform the Market

2007-11-26T06:08:00.001-08:00

It seems with latest buzz about ETFs and the ease of trading individual sectors within an index, sector rotation strategies are becoming increasingly popular. So the question I’m frequently asked is “how can your sector rotation strategy increase the odds of outperforming the market?”

The answer is quite simple. A positive outlook for the economy surely helps the broad market, but many times during the economic cycle some sectors will outperform the market and respond more favorably than others due to various external factors. The intent of a sector rotation strategy is to increase exposure to the sectors anticipated to outperform and reduce exposure to the sectors anticipated to remain flat or under perform. In doing so, the portfolio manager can capitalize on market fluctuations with the opportunity to benefit from sector expansions and sidestep sector declines.

Keep in mind there are many ways to formulate a sector rotation strategy. Here are the most popular:

Technical Analysis, the analysis of price action, trend lines or other quantitative factors enabling technical analysts quantify a trend change

Top-down Analysis, the theory that changes in the economy can signal imminent changes in sector movement

Fundamental Analysis, the approach of evaluating company financials within a specific sector

Therefore, if a portfolio manager monitors the general health of the economy, the various external factors that have the ability to drive a specific sector and has a solid money management strategy they have a good opportunity to outperform the broad market.

To learn more about the sector rotation strategy I employ for my clients or how we swing trade visit my website http://www.etfupdater.com/

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://www.etfupdater.com/

2007-11-17T19:26:00.000-08:00

I was recently emailed from an individual interested in our ETF Updater informational service. He was asking how someone can learn about technical analysis and swing trading online.

Obviously, there are quite a few ways to learn about technical analysis, daytrading and swing trading. First, the self taught method is probably the most popular, but unfortunately if the self taught technician doesn’t have much interaction with other technical analysis experts they may learn and commit to memory incorrect information. I’ve noticed many times when “self-taught” technical analyst had an incorrect read, did not understand some terminology or even how to correctly interpret a particular study they claimed to have expertise with.

Initially, I went the “self-taught” way of learning technical analysis and swing trading, but I soon realized I had very little resources to turn to if I had a question and it seemed the so called “experts” willing to share their knowledge didn’t know what they were talking about either. It was sort of like the blind leading the blind.

Next, there are trading schools. In a “past life”, I was an instructor at one of the largest trading firms for independent traders. Because of my past experience, I’m always intrigued to learn more about what the latest schools are teaching. Unfortunately, after reviewing many of the various schools curriculum, it seems they attempt to teach a few trading methods for either day trading or swing trading instead of the “how” or “why” the trading method should work.

The topics in my curriculum consisted of Trading Psychology, Market Mechanics, Market Analysis, Identifying Opportunity, Technical Analysis and Risk Management. Basically, I showed people the “How and Why” of trading. Sure, we taught a few strategies, but the “nuts and bolts” of the course was actually to teach the fundamentals so traders can create a style of trading that suites their personality.

The final and I believe the best way to learn about Technical Analysis is to join an organization like the MTA (Market Technicians Association, http://mta.org/). The organization has a program similar to the CFA (Chartered Financial Analyst) except the MTA focuses on Technical Analysis. Once an individual completes the program they are granted to use the CMT (Chartered Market Technician) designation.

I’ll continue to post additional pieces of technical analysis and may start a video blog to compliment my efforts to help teach individuals aspiring to trade for a living, so stay tuned.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://www.etfupdater.com/

ETF Swing Trading - Hedging The Portfolio

2007-11-16T12:42:00.000-08:00

I’m a trend trader and trend traders tend to weight their portfolios more heavily in the same direction of the trend. Unfortunately, when trading trends, the portfolio tends to give back unrealized profits during counter trend moves, so to mitigate our drawdown I hedge the portfolio.

For example, say there is a firm called Capital ETF Management, it is near the end of the quarter and the ETF Portfolio Manager deems a correction is imminent. He wants to secure some unrealized gains instead of buying ETF options or liquidating positions.

The money manager calls M1 Consulting LLC (that is my consultancy) and they engage us for additional insight as to how they can reduce risk should a correction occur. Capital ETF Management has a portfolio consisting of the following Exchange Traded Funds a Wisconsin ETF, Copper ETF, Alternate Energy ETF, Wilshire 5000 ETF, China ETF, Precious Metal ETF, Brazil ETF and an Emerging Market ETF.

How would I approach the scenario?

First, I need to determine what security has a near perfect correlation to the portfolio (keep in mind this could be a few different securities depending on the portfolios composition).

After further analysis, we realize the Capital ETF Management portfolio has a near perfect correlation with a Profund’s ETF.

Now I can:

Calculate the estimated volatility of the portfolio
Calculate the estimated volatility of the Profund’s ETF being used as a hedge
Determine when the hedge should be put on
Determine when the hedge should be taken

Note: This should all be calculated and determined before the hedge is put on.

Once I calculate the volatility for the portfolio and the ETF being used a hedge I can determine how many shares must be purchased or sold to put the hedge on.

To learn more about hedging or for more swing trading education visit us at http://etfupdater.com/freeinformation

Mike Matousek, CMT
Portfolio Manager for ETF Updater
http://www.etfupdater.com/

Consumer Staples ETF (XLP) – Sector Rotation

2007-11-16T08:20:00.000-08:00

There is a saying the smartest minds work on Wall Street. I’m sure many people agree and want to follow the “professional” opinions they read or hear, but with all of the misinformation, opinion changing and ulterior motives I’m been asked, “how do you know what to do”?

The answer is simple. Sure, I read other opinions about the market, but I don’t act on them unless the market’s price action corresponds with idea behind the opinion. For example, many of the “professionals” are talking about a recession or possible depression. One went as far as saying this is the worst since the great depression. Now, I don’t know if he is correct, but I do know this, the Consumer Staples ETF (XLP) is composed of defensive companies. This means, the companies in the index make products people should be buying regardless of the health of the economy.

For example, here are a few companies in the index as of 11/15/07"

Procter & Gamble Co. PG

Altria Group Inc. MO

Wal-Mart Stores Inc. WMT

Coca-Cola Co. KO

CVS Caremark Corp. CVS

PepsiCo Inc. PEP

Kraft Foods Inc. Cl A KFT

Colgate-Palmolive Co. CL

I bet you purchase many of the products produced by these companies or shop with them regularly.

I run a model portfolio at ETF Updater called the “Sector Rotator”. It seeks to outperform the S&P 500 and just before I wrote the post we liquidated the Industrials ETF (XLI) and replaced it with the Consumer Staples ETF (XLP). I’m not pumping the Consumer Staples ETF for investors or Swing Traders, I’m disclosing I do have a position in XLP.

If you would like more ETF Education, Swing Trading Lessons or would like to know when we make changes to our Sector Rotator portfolio visit us at http://www.etfupdater.com/.

Mike Matousek, CMT
Portfolio Manager, ETF Updater
http://www.etfupdater.com/

Complete ETF List - ETF Providers

2007-11-15T09:27:00.000-08:00

To learn more about ETFs, how they are constructed, what types are available and which ETF is the best ETF for your investment portfolio you may want to take a look at the following ETF company links.

Here is a current list of ETF Providers:

Barclays iShares
SPDRs
PowerShares
Rydex Funds
State Street Global Advisors
Merrill Lynch HOLDRS
BLDRS
Vanguard ETFs
Fidelity
Deutsche Bank
First Trust Portfolios
WisdomTree
ProShares
HealthShares
Market Vectors
XShares
Arrow Funds
Claymore

If you would like to learn more about how the stock market exchanges work here are the links to a few exchanges:

NASDAQ
NASDAQ Trader
NYSE
AMEX

Happy Trading

Mike Matousek, CMT
Portfolio Manager for ETF Updater
www.etfupdater.com

Trend Trading ETFs – What Moving Averages You Should Avoid!

2007-11-15T08:27:00.001-08:00

If you trade in the markets I’m sure you have heard the phrase “the trend is your friend”. The phrase makes seems to make sense, IF you truly understand trend trading.

If I had the opportunity, I would change the phrase to “The Trend is Your Friend, IF you know which trend you should be looking at.

Many times I’ve met traders that look at long term trends, but seek a short term trade. Personally, I think this is a rookie mistake since they are only looking at one trend. I can show many instances when traders take losses thinking they are trend trading, which are, but they are selecting the wrong parameters when determining the trend.

For example, one trader I met used the 50 day moving average for swing trading two to three day moves. He has the right idea, sort of, but the price of the ETF could literally fall 10% and the trend would still be intact. Since he was swing trading for such a short time period compared to his trend indicator he couldn’t give his trades enough “wiggle” room to actually work. Therefore, he was constantly getting stopped out for a loss only to see the ETF rally back to a profitable level a few days later.

What’s the moral to this post? Traders need to select a trend that corresponds to their trading time horizon. My trade time horizon is about half of the time it takes to create the end value of the indicator. For example, a 10 day moving average would generally command a four to five day holding period for the ETF in question.

For more swing trading tips or swing trading education visit my website http://www.etfupdater.com/.

Good Luck and Happy Trading

Mike Matousek, CMT
Portfolio Manager, ETF Updater
www.etfupdater.com

Commodity ETF Assets Growing

2007-11-15T06:47:00.000-08:00

Commodity ETF Assets Growing Exponentially

Assets invested in natural resource ETFs continue to grow at an astounding pace. For example, assets in natural resources grew more to more that $2 billion from about $250 million at the end of 2006.

I generally follow the following commodity ETFs:

DBC, DB Commodity Index
GDX, Market Vectors Gold Miners
GLD, Street Tracks Gold Trust
IGE, iShares Goldman Sachs Natural Resources
DBA, PowerShares DB Agriculture
SLV, iShares Silver Trust
UNG, United States Natural Gas Fund

On another note, JC Penny will be in play today so we will be focusing on the RTH (retail HOLDRS) ETF and the XRT SPDR S&P retail ETF.

Happy Trading

Mike Matousek, CMT
Portfolio Manager, ETF Updater
www.etfupdater.com

Stock and Trends Vs. Fundamental Analysis

2007-11-14T11:07:00.000-08:00

The other day I spoke at the National Association of Active Investment Management ETF Symposium. There were about one hundred money managers seeking additional information about tactical approaches to trading ETFs, so I was able to network and meet a few portfolio managers most individuals only read about.

One of the participants was Greg Morris of PMFM Inc.(they manage over $1 billion). We had a great conversation about technical analysis, fundamentals and how they apply to the investment decision making process. I found our conversation to be quite informative and thought provoking. I bring this up because during the conversation Greg told me the following … “All of the financial theories and all of the fundamental analysis in the world will never be any better then what the trend of the market will allow”.

If you stop and think about the quote it makes complete sense. How many times have you entered a position based upon fundamental facts and proceeded to lose capital only to realize you were investing against the trend?

Happy Trading

Mike Matousek, CMT
Portfolio Manager , ETF Updater
www.etfupdater.com

Making Money With More Unprofitable Days Than Profitable Days

2007-11-14T07:11:00.000-08:00

I few people emailed asking if I can explain how a trader can have more unprofitable days than profitable days and still make money.

First let me say, my trading is more of a portfolio style than day trading. I started trading and designing client portfolios in 1996, then in 1998 I decided to day trade full time for a living.

Originally, day trading was much easier than it is today. Back then stocks moved in 1/8ths, we were able to short on downticks when others couldn’t, we were provided as much margin as we wanted and the execution systems were years ahead of the other market participants. That being said, you can understand how we were able to make money and not know a thing about how the market really operates.

Nowadays, the playing field is much more level and my trading is more of a portfolio swing trading style (holding positions for multiple days at a time), but when I catch a good move I will hold it until it runs out of momentum. I’m almost always long and short simultaneously, but I don’t seek to be delta neutral. I just try to find a few ETFs I feel are poised to go lower and a few I think are ready to go higher.

My new approach is more reserved since I let the portfolio “breath”. Besides, I don’t need to make money everyday, although it sure would be nice. My philosophy is, “there are approximately 20 trading days in the month, if I can break even on fifteen and have five good days I’m on my way to making money” . Following this philosophy reduces much of the stress inherent with trying to pull money out of the market everyday.

Mike Matousek, CMT
Portfolio Manager for ETF Updater
www.etfupdater.com