SvetikTech

Swaps on indexes and ETFs are designed to track the performances of their underlying indexes or securities. The performance of an ETF may not perfectly track the inverse performance of the index due to expense ratios and other factors, such as the negative effects of rolling futures contracts. Therefore, inverse ETFs that use swaps on ETFs usually carry greater correlation risk and may not achieve high degrees of correlation with their underlying indexes compared to funds that only employ index swaps.

Many inverse ETFs provide exposure by employing derivatives. Derivative securities are considered aggressive investments and expose inverse ETFs to more risks, such as correlation risk, credit risk, and liquidity risk. Swaps are contracts in which one party exchanges cash flows of a predetermined financial instrument for cash flows of a counterparty's financial instrument for a specified period.

The ProShares Short MSCI Emerging Markets ETF, also created in 2007, seeks to provide the inverse daily performance of the MSCI Emerging Markets Index. The fund, with over $250 million in net assets, has average daily trading volume (ADTV) of $19.03 million and a narrow average spread of 0.05%, making it a suitable instrument for short-term traders. EUM has a 9.46% YTD return, a 0.95% expense ratio and pays investors a dividend yield of 0.22% as of Nov. 9, 2018.

The share price of EEV rallied strongly in October as global equity markets took a bath. The move higher was accompanied by above-average volume, suggesting institutional buying. EEV's price has started November by pulling back to an established uptrend line at the $48 level that offers traders a buy-in opportunity. The relative strength index (RSI) is trading below 50, giving the trade plenty of upside room before reaching overbought conditions. Traders could position their stop below the current swing low and aim to exit with profits near last month's high at the $58 level.

Trading Strategy: Buy TJX shares on weakness to my quarterly pivot at $47.90 and add to positions on weakness to my semiannual value level at $44.84. Reduce holdings on strength to my weekly and annual risky levels at $53.89 and $56.51, respectively.

The weekly chart for TJX has been positive since the week of Jan. 11, with the stock above its five-week modified moving average of $49.04. The stock is also well above its 200-week simple moving average, or "reversion to the mean," at $39.79, last tested during the week of Nov. 17, 2017, when the average was $34.74. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 75.90 this week, up from 66.43 on Feb. 22.