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business newsLeveraged ETFs: Looking for Bear Tracks
By
Adam Warner
Mar 31, 2009 9:40 am
Signs that the market disbelieves the rally?
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Here, we see the Russell 2000 offshoots:
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And here's the SPX-Russell 1000:
Again, what I did was compare the dollar volume "bet" on the short side leveraged ETFs to the long side leveraged ETFs. And I used 10-day average volume.
It's intended as a put/call like sentiment comparison: The idea is, the bigger the bet on the short side, the greater the bearish sentiment. I can't figure out how to label the horizontal bars on Google spreadsheets, so just know that each bar represents one day, starting on the left in late November.
Yes, that's really only 4 months of data, so it's pretty impossible to tell what's going to be an excessive reading without the benefit of hindsight. I suspect that, over the course of time, a measure like this will only have value if it picks up a divergence. In other words, maybe you see a market rally, and you see volume remaining in the leveraged shorts. That would be a sign on the margins that the market disbelieved the rally.
All that being said, these measures kind of did as expected. Bearish sentiment as measured by VIX and the put/call ratio never got out of hand in February and March. Perhaps the ratios above in that stretch (the spike in both these charts) will prove excessive.
Time will tell.
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