AMEX:FAZ   DIREXION SHARES ETF TRUST FINANCIAL BEAR 3X SHS
The biological crisis has stabilized, but the financial crisis is just beginning. True, the Fed has been injecting huge amounts of money into the financial system via repo and treasury and mortgage bond buying. In just a few weeks we're doing more QE than we did over 8 months back in 2008. That should help prevent outright bank failures, but there's still going to be a lot of pain as mortgages and corporate debt start to default.

The canary in the coal mine for a mortgage default crisis is unemployment, and this week we're likely to see initial jobless claims jump from 280,000 last week to some number in the millions. Reports indicate that New York's unemployment office is receiving 200,000-500,000 new claims per day, and California's jumped from 2,000 to 80,000 overnight. Both offices are overwhelmed and their employees are working huge amounts of overtime to keep up with all the new claims.

Bad mortgages aren't as big a risk to the economy as they were in 2008, but they're still a pretty big risk. The Trump administration has been lowering lending standards for several years, and the share of mortgages considered "high risk" has been rising rapidly. There's going to be pain in the banking sector. I will enter FAZ ahead of Thursday's ICSA report this week.
Comment: I just saw a report that the stimulus package under debate in Congress is going to be $2 trillion, or about twice as large as originally expected. If so, then we will start the week with a rally and you won't want to buy into FAZ until Wednesday ahead of the jobless claims number. The current Estimize consensus is about 1.1 million jobless claims this week, but I'm thinking the actual will be higher than that. I set my forecast at 2 million.

Comments

What would the general consensus be going into tomorrow and next week, considering where the FAZ is after close today, ($24.6)? I am shocked it came down so much, as if financially we are bullish, Seems like now would be the time to go long?
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@mcmutton23, I'd wait for a reversal signal.
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mcmutton23 ChristopherCarrollSmith
@ChristopherCarrollSmith, Ah thank you for the reply. At this time, would you recommend buying calls on FAZ or puts on FAS considering I am bearish on it?
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@mcmutton23, puts on FAS would be the more efficient way to play it.
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This IS 'The BIG ONE' that NO-ONE gets away from.
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FAZ isnt meant to be held overnight
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@dimension4, so they say, but I do it all the time with good results.
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dimension4 ChristopherCarrollSmith
@ChristopherCarrollSmith, actually if you could short both fas and faz and hold them long term without paying borrowing cost youd make far more than any strategy. owning either is a losing game for you.
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@dimension4, shorting FAS is a good strategy for those who have access to options and don't mind the sometimes steep minimum investment for buying puts.
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nice review and detailed write-up. I agree with you!
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