ETF's HED and the Capped Energy Index

Here is a sample of a down day and what an ETF trading might be able to do in place of short selling the regular stocks.

December 22nd, 2008.
SPT/TSX Capped Energy
Dark blue is the previous day close
Light blue is the Primary Pivot point
Green are the S1, S2 and S3

Yup, definitely a down day as the index lost close to 6%. The S1-3 did not mean a whole lot here but there were some bits of support as the price fell and some definite resistance around the $199 mark.

Suncor for the same day

Support fell in some key points and would have been nice setups for some short selling. Too bad I was not watching for these that day. I did trade it and had five trades 3 long fighting the trend and two short. 65 cents gained long (I captured the first big move from $24.40 to $24.90) and only 52 cents gained short as I did not watch the market at all after the first long trades, I got busy with other stuff and came in later in the afternoon when everything had already done most of the dropping.

HED, Horizons BetaPro S&P/TSX Capped Energy Bear Plus ETF, same day

Buy $21.33 Sell $21.64 Gain 31 cents ps Return 1.5%
Buy $21.91 Sell $22.27 Gain 36 cents ps Return 1.6%
Buy $22.61 Sell $23.01 Gain 40 cents ps Return 1.8%
Buy $23.11 Sell $23.31 Gain 20 cents ps Return 0.9%

$1.27 gain per share or 5.8% overall return on trades

This would fall under my multiple lot position sizing as well.
I need to actually make some ETF trades to know how they will behave. The volume is a little low bit the price is more dependant upon the underlying index than the bids and asks. It can indicate a sentiment but not a definite directional move. One thing that I noted today while watching a few ETFs is that the quote spread can be substantial. They just don't feel the same as a stock. It might be partly due to the reverse movement as well as the non-stock quotes.

I think this will be a reasonable substitute for short selling, though it may only be used on those definite downtrend days as I don't think it a great vehicle to attempt to use for those quick drops in price that I might normally try a short while in between long trades.

Jeff.