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ETF

EWI’s Newest Service Picks ETFs: Interview with the Editor

EWI’s Wayne Stough adds another Flash opportunity service to the line-up: ETFs
October 7, 2010

By Elliott Wave International

Every trader or active investor at times wishes they could pick the brain of a pro that has “pulled the trigger” on real-money trades before.

EWI Director of Analysis Wayne Stough is one of these pros. For several years, several times per month, he’s been alerting his Flash service subscribers to opportunities in futures markets.

And now, there is a new addition to the Flash service line-up: ETF Opportunity Flash. We caught up with Wayne in his office and asked him a few questions:

Q: What method do you use when looking for high-probability trade set-ups?

Wayne Stough: My main approach is The Elliott Wave Principle. I look for clean, precise wave counts — usually ones that other analysts can confirm, so there is a general consensus on market direction. Once the market meets my other criteria for a high-confidence trade, I send out a Flash recommendation to my subscribers.

Q: How do you define a “high-confidence” trade?

WS: That’s a good question, because no market forecast is ever guaranteed, whether you use Elliott or some other forecasting method. Having said that, there are definitely moments when probabilities (or odds, if you will) strongly suggest a particular move. For example — and this is just basic Elliott — the Wave Principle says that markets move in a series of five waves in the direction of the larger trend (labeled on a chart 1, 2, 3, 4, 5) and three waves against the trend (labeled A, B, C). Also, there are certain proportions between these waves that markets often adhere to. So whether I’m counting a 1, 2, 3, 4, 5 pattern in a rally or a decline (i.e., in a bull or bear market), I focus on where the fifth wave should end, according to Elliott wave guidelines.

Once I’ve identified that price termination point, it becomes a matter of waiting for the market to get there. Fifth waves come at the end of the pattern and are usually weaker than third waves. So once I see certain technical indicators diverging (e.g. the RSI), my confidence grows: We are near the end of the pattern, and prices are about to reverse. That’s just one example of a high-confidence situation. But I do suggest a protective stop with every new Flash alert, in case the forecast doesn’t come true.

Q: Are you aiming for a particular percentage gain?

WS: Absolutely. When I send a Flash alert, I’m typically looking for a 3-to-1 ratio, at a minimum.

Q: Does that always work out?

WS: No. I monitor the recommendation for warning signals that let me know when a different scenario is unfolding in the charts. In those cases, I send out another Flash alert suggesting to lower or raise the stop-loss level, or exit the recommendation entirely.

Q: They say you love the S&P Mini as a trading vehicle. Why?

WS: I’d put it differently. I have traded the S&P for a long time, I understand that market’s nuances, and I like the leverage and volatility. But while the S&P comes naturally to me, I’ve also made many Flash recommendations on other markets, like gold and currencies. So, a better way would be to say that I love any market that gives me the desired risk-reward ratio. Now I’m also “looking for love” among various ETFs.

Special Introductory Offer: Get ETF Opportunity Flash now and have 2nd month FREE. Details.

Q: If traders expect a bear market, should they still consider Flash Services?

WS: Absolutely. I think we’re at the cusp of something very big in the stock market. And this is the time to act. Just keep in mind that speculating in severe bear markets (or during extreme volatility) carries additional risks. So be sure you do your research and know how your financial instruments behave under these conditions. And anyone who chooses to trade in this environment must only risk the money they absolutely can afford to lose.

Q: Who do you think should consider subscribing to EWI’s Flash Services — including the newest addition, the ETF Flash?

WS: Anyone who has some risk capital but not enough time or experience to find their own opportunities. Anyone who understands and accepts the fact that when you bet your money, there will be winners and losers. (Sometimes more of one than the other.) Anyone who knows better than to risk all their capital on a single recommendation; the old “all eggs in one basket” situation. I think in terms of quarters: I want all my subscribers smiling at the end of a quarter.

EWI ETF Opportunity Flash service now brings you potential high-probability opportunities in exchange-traded funds (ETFs). Don’t miss this special offer.

This article was syndicated by Elliott Wave International and was originally published under the headline EWI’s Newest Service Picks ETFs: Interview with the Editor. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

iShares Brazil ETF – EWZ – Let the carnival begin!

Here’s a market that we like a lot more than the US market. It looks set to take out the highs that were seen in December of 2009. If that’s the case, we could see this market make all-time highs quickly. You definitely want to have the iShares Brazil ETF on your radar screen.

In this new short video, I show you what I’m looking at and how we showcased this market last week when we did our last webinar. This webinar is set to be rebroadcast on Friday, September 24th at 5pm EST/9pm GMT.

This market is still looking good and looking strong. Pay very close to it this Friday because if it closes well, it should bode well for the following week.

How to play the inverse, leveraged Euro ETF

Here’s a unique take on how to play the inverse, leveraged Euro ETF.

The video runs a little over two minutes and gets right to the meat and potatoes of this market.

This particular ETF is leveraged and trades almost 2,000,000 shares a day, so it is nice and liquid. What makes the Euro ETF so interesting, is that it plays such a big part on the financial world stage.

Watch the video here: How to play the inverse, leveraged Euro ETF

ETFs For Commodity Investors

Exchange Traded Funds
In recent years, there is one type of fund that has hit the commodities market creating a major impact. This comes in the form of exchange traded funds. United States markets alone hold more than $10 billion in assets, as of 2009. The investor has many choices when it comes to using these funds. They use them to purchase exposure to individual commodity sectors, gold, oil, broad-based commodity futures indexes, and silver. What makes these funds so popular is the fact that they are very easy to purchase. They are purchased as an exchange-traded fund as an investor would purchase any other security. Exchange traded funds are considered very affordable because there is no commission charge for purchase and they cost approximately 75% less than a commodity mutual fund.

Exchange-Traded Funds Linked to Individual Commodities Futures
Futures are very popular with investors, which can be considered the home of commodities-linked exchange trade funds. The way this works is that this type of fund will buy futures with leverage, but they will only offer a small part of the cost of the contract. Then the remaining balance will go to treasuries, who will in turn generate income from the interest that is accumulated. When an investor begins to inquire about the return he or she will get on their investment, the answer can be increasingly complicated. This is because it is based on many different contingencies that begin with roll yield, collateral interest income, and ends with any changes in spot price.

[Read more…]

Active ETFs on the Launch Pad – Morningstar Video

Rick Ferri, founder of Portfolio Solutions and the author of ‘The ETF Book,’ on the rise of the ‘Spindex’ and why 2010 will be known as the year of active ETF launches.

Where can I find ETF Portfolio Composition Files?

While some ETF marketers distribute stale lists of the stocks that compose a particular ETF, I would like to find a source of machine-readable, up-to-date PCFs. Can anyone point me to a location where they can be found or a service that sells access to them?

Are Municipal Bond ETF Dividends Taxable if the bonds held are in your state of residence?

I live in California and I am looking at CMF.
CMF is an Exchange Traded Fund (ETF) which holds CA Muni Bonds and pays a monthly dividend. Do I pay taxes on these monthly dividends if I live in California?

What to look for when selecting an ETF fund?

What is the criteria when pulling a decent fund from ETF screener? What are the factors when choosing an ETF that can lower risk?
Are morningstar ratings solid reference?

ETF Resources

ETF Basics

An ETF (Exchange-Traded Fund) is similar to a mutual fund, but trades like a stock. An ETF can contain a basket of stocks, bonds, commodities or almost any kind of security, in any combination. Like a mutual fund, it trades at the same approximate value as the net asset value of the underlying components that make up the ETF, but unlike a mutual fund, can be traded like stocks throughout the day. Available in the US since 1993, many ETFs track an index, such as the S&P index or the DJIA (Dow Jones Industrial Average). Since 2008, however, many ETF funds are actively managed. Like a stock or a mutual fund, an ETF has a ticker symbol to identify it.

Terms to Know

  • Tracker fund
  • Index ETF

ETF Resources

ETF Trading Signals: ETF advisory service.*

InvesterTech ETF Quotes: Exchange Traded Funds quotes by symbol

Morningstar Exchange Traded Funds: ETF quotes, commentary, news, glossary.

Rydex Exchange Traded Funds: The Rydex S&P Equal Weight ETF seeks investment results that correspond to the performance of the S&P Equal Weight Index (S&P EWI), an index developed by Standard & Poor ’s in cooperation with Rydex Global Advisors. The S&P Equal Weight Index utilizes quarterly rebalancing to maintain its equal-weight stance.

PowerShares Capital Management: PowerShares provide institutional caliber asset management through the replication of enhanced indexes allowing PowerShares to deliver some of the most sophisticated investment management available in a benefit rich vehicle, the Exchange Traded Fund.

iShares: iShares are the world’s most extensive family of Exchange Traded Funds (ETFs). iShares combine the advantages of stocks with those of index funds. Like stocks, they are liquid, easy to use, and can be traded in whatever number of shares you wish.

Barchart ETF Quotes: Exchange Traded Funds quotes.

Motley Fool ETF Center

Yahoo ETF Center

Articles

Finding the Cream of the Crop Among ETF Signal Services