Daily Investment Interpretations

June 4, 2009

2009-6-4:   The indices rose about 1% today. The NASDAQ Composite gained 24.1 points (1.32%) to 1,850.02, the Dow annexed 74.96 points (0.86%) to 8,750.24, and the S&P 500 added 10.7 points (1.15%) to close at 942.46 The VIX slipped -0.84 to 30.18. Oil hit closer to $70 a barrel, at $68.90 a barrel, while gold rose $17 to $982.
    This market behavior is what one might expect from a market that has gone from the bottom of its short-term range to its break-out at the top of its range. There must now be a bevy of claims that the economy is getting ready to tank, and that the stock market is prepared to follow suit. Otherwise, the stock market wouldn't climb a wall of worry, but would immediately jump to its bull market peak. For whatever reasons, it doesn't normally work that way.
    Two ultra index funds that offer the prospect of doubled gains (and doubled losses) are the Proshares Ultra Emerging Markets, UUPIX, and the Proshares Ultra S&P 500 Exchange-Traded Fund, SSO. (I've had major reservations about the recent performance of UUPIX, but by now, it seems to have redeemed itself.)
    The charts below show UUPIX and SSO plotted together with their underlying averages.

    Both of these funds might be expected to quadruple if their underlying indices returned to their 2007 highs. I don't expect that to happen, but profitable moves from here look plausible. 
    I plan to sell when their 50-day moving averages turn down. 
    The two charts below show these funds' 25- and 50-day moving averages.