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3 ETFs On My Watchlist For The Coming Market Correction

April 4, 2014


    3 ETFs On My Watchlist For The Coming Market Correction

    3 ETFs On My Watchlist For The Coming Market Correction – As I mentioned in yesterday’s Daily Briefing, it is imperative for those who are currently invested in the U.S. stock market to have an exit strategy. The idea of approaching these highly distorted markets in our tumultuous economy with a “buy and hold” mentality is unwise. Some of the brightest minds on Wall Street are pointing to the writing on the wall.

    Today, Wall Street is little more than a glorified casino. And just like in any casino, those who “deal” the cards have an enormous advantage over those who are “holding” the cards.

    Of course, no one knows when the next stock market correction will occur. All that an investor can do is craft an exit strategy designed to protect his investments when the markets inevitably begin to move lower.

    Remember, all markets move in only one of three directions: Up, Down, or Sideways. Right now, the U.S. stocks are soaring to new all-time highs. But nothing goes up forever. Once the market finally turns over, it will be time to sell stocks, lock in gains, and begin “shorting” the market. (By shorting, I am referring to the concept of investing in such a way that you make money as the stock market goes down.)

    The FTM Market Barometer remains solid GREEN, indicating that the uptrend is in full force. But when the next downturn begins to unfold, we will alert all of our FTM Insiders by email.

    Now, as promised, here are three ETFs that I plan on buying when this bull market eventually begins to turn bearish.

    ProShares Short S&P 500 ETF (Ticker: SH) – The S&P 500 index, which is one of the most closely watched indices in the world, is currently breaking out to all-time highs. Investors are exuberant and optimism is growing. But when investor sentiment changes and the market begins to move lower, investors will be heading for the exit doors. At this point, many investors will simply sell off many of their holdings and wait for the correction to end. However, some investors will actually profit from the downturn by shorting the markets. One way to make money as the S&P 500 index moves lower is by investing in the ProShares Short S&P 500 ETF (Ticker: SH). As an inverse ETF, this investment trades like a stock and actually goes up in value as the S&P 500 falls. This ETF is one of my favorite ways to profit from falling U.S. stocks when the FTM Market Barometer turns RED.

    ProShares Short QQQ ETF (Ticker: PSQ) – This ETF is similar to the ProShares Short S&P 500 ETF, except it turns a profit when the tech-heavy Nasdaq 100 index falls in value. The Nasdaq 100 index is filled with 100 massive companies that will inevitably move lower in a severe market correction, including Amazon, Facebook, Apple, Google, Microsoft, and Cisco. As the Nasdaq 100 index falls, the ProShares Short QQQ ETF (Ticker: PSQ) moves higher.

    iPath S&P 500 VIX ST Futures ETN (Ticker: VXX) – When the stock market begins to fall, volatility usually spikes. One way to take advantage of this increased volatility is to buy VXX, which is an ETF that tracks the CBOE Volatility Index futures (better known as the VIX.) Back in 2008, the VIX increased five-fold as fear and panic hit the market. I believe that it will perform strongly again when the next major market collapse gets underway.

    These are just three of the ETFs that are on my watch list to buy when this current rally finally begins to run out of steam.

    But until then, I am staying long on this market.

    Don’t waste time fighting the uptrend. Instead, learn to “befriend the trend.”

    And just as importantly, learn to identify a change in the trend. And then trade accordingly.

    Until Monday,
    Jerry Robinson

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    A Daily Dose of Financial Wisdom from God's Word
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