In our daily note from last Friday, our market technician David Chojnacki pointed out that market technicals were weakening across the board, with declining MACD’s, RSIs, and ROC (10’s) that were barely positive at best. David also pointed out that the 1385 level in the SPX (S&P 500 Index) was pivotal as being a barometer for a significant correction, and alas the market has failed to close above that level on successive sessions this week.
Beneath 1385, he points to a potential pullback to the 1340 level (SPX closed at 1358.59 yesterday) which would be equivalent to a 5-6% pullback in the broad market. No doubt, there are a number of institutional managers that have simply sat out the 2012 first quarter rally and are likely under-allocated to equities but may be chomping at the bit to participate given this steep and sudden reversal in the equity markets.
Similarly, those whom were fortunate enough to establish short equity positions near the “top” in recent weeks, are likely looking for levels and reasons to take profits off of the table, especially if the market hits any near term support levels.
For those looking to leverage exposure to upside in the broad based equity markets, either in outright speculation or for hedging reasons, there exist a number of leveraged ETFs that are designed as trading products.
ProShares Ultra S&P 500 (NYSEArca: SSO) is designed to deliver 2 times the daily leveraged return of the S&P 500 Index. ProShares UltraPro S&P 500 (NYSEArca: UPRO) is structured in a similar fashion, only it is designed to provide 3 times the daily leveraged return.