....Europe, earnings season, kick-the-can mentality, well, frankly the list just goes on and on. The financial sector both here and abroad is in tough shape. It is no secret that the banks still hold portfolios of garbage and biz is bleak in many of their profit centers. The on-going crisis in Euro-land involving sovereign debt, the financial sector and governments' inability to face their current problems is combining to create strong headwinds for the sector.
In short, banks stink. That may be an over-simplification but sector rotation does not lie. Money has been and is flowing out of bank stocks and into other more attractive sectors.
One of the most efficient ways to capture the movements in the banking and financial sector stocks and do it with some amplitude is Direxion's FAZ ETF. Known as The Financial Bear, it is a 3x fund that invests in the short side of the financial sector if you will. The moves are dramatic and volatile. The ETF has been trading in a range between $50 and $80 a share for the past 2+ months. Currently it is now back at the lower end of that range, trading in the low-to-mid $50's. We are initiating a position that will either move back to the top end of the range, preferably in the $70's or will stop us out if it moves lower and falls out of its current trading range. Any movement into the high $40's taking out yesterday's low would cause us to be stopped out on the position.
Not for the weak at heart, it is a small position that will either juice the portfolio returns or create a small and negligible loss to the portfolio.