Hat tip goes to reader Larry who pointed to a new ETF that recently came on the market. It’s a managed Bear ETF and it works as follows:

The investment objective of the Active Bear ETF (HDGE) is capital appreciation through short sales of domestically traded equity securities. The HDGE portfolio is sub-advised by Ranger Alternative Management, L.P. The portfolio management team implements a bottom-up, fundamental, research driven security selection process. In selecting short positions, the Fund seeks to identify securities with low earnings quality or aggressive accounting which may be intended on the part of company management to mask operational deterioration and bolster the reported earnings per share over a short time period.

There are several reasons listed as to why an investment in HDGE might make sense:

As a Tool to Hedge Equity Exposure – HDGE can be used as part of a long/short strategy in which an investor may synthetically integrate by pairing HDGE with a long-index ETF (or an investor’s portfolio of long positions), providing the investor with a “buy and hold” option to hedge their long domestic equity exposure.

As you would expect, an actively managed ETF has higher annual expenses, and HDGE is no exception. The current net annual expense ratio is listed at 1.85%.

This is a new kid on the block with currently only $26 million under management and no track record. The concept sounds very interesting, but HDGE will need to prove itself for a minimum of some 9 months. That will allow enough time to establish a pricing and trading history to better evaluate how this ETF has fared in various market conditions.

I will report on in it again later on this year.

Disclosure: No Positions

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

A breakout to the upside moved the Dow and S&P; 500 above their milestone 12,000/1,300levels.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has moved above its trend line (red) by +4.85% (last week +4.71%) and remains in bullish mode.

The international index has broken above its long-term trend line by +9.25% (last week +7.64%). A new Buy signal was triggered effective 9/7/10. If you decided to participate, be sure to use my recommended sell stop discipline.

As is usually the case, when milestone levels are broken, the markets took a pause yesterday as mixed news did not provide enough of an impetus for the bulls to drive the major indexes higher.

As the chart above shows (courtesy of marketwatch.com), the S&P; 500 trended within a five point range and closed slightly lower.

Some contributing factors to the sideways activity were violent outbursts in Egypt and miserable weather conditions in parts of the U.S. Nevertheless, the markets remained fairly resilient despite no shortage of opinions that a major correction is about to occur.

ADPs announcement of strong private sector growth was taken in stride as those numbers (187,000 jobs added in January), have not been an accurate reflection in the past as to how Friday’s unemployment report will turn out.

It was party time on Wall Street yesterday as both, the Dow and the S&P; 500, cleared their respective milestone hurdles of 12,000 and 1,300 by a solid margin.

Setting off the move past the resistance levels was a report indicating that U.S. manufacturing is showing the most strength since 2004. Helping matters was the fact that Egypt remained fairly quiet and that the traffic along the important key waterways was flowing normally.

This was encouraging news in that it alleviated fears that global economic activity won’t be interrupted—at least not for the time being. Markets around the world participated in yesterday’s rally and most asset classes were higher with the exception of bonds, which fell due to rising interest rates.

The S&P; 500 closed at 1,308, its best finish since June 25, 2008, just two days after our domestic sell signal effective June 23, 2008. In other words, if, as a buy and hold investor, your portfolio tracked the performance of the S&P; 500, you will now have almost reached the breakeven point…

The market will face some headwinds today in form of the ADP National Employment Index and a report on layoffs. Maybe yesterday’s euphoria can carry us through these numbers as well, should they not turn out to be as anticipated.

Yesterday, the markets looked past the turmoil in Egypt and recouped a good chunk of Friday’s losses.

Supplying the initial boost were a couple of takeover announcements and better-than-expected earnings from Exxon Mobil. Further helping the upside cause were two economic reports showing that the recovery maybe gaining steam.

Consumer spending rose more than forecast as purchases, which account for 70% of economic activity, climbed for the second consecutive month in a row. Additionally, another report showed that businesses expanded at the fastest rate in two decades according to the Institute for Supply Management.

Gold lost and interest rates rose. Nevertheless, the markets managed to close up in January, which can bode well for the rest of this year.

According to the Stock Trader’s Almanac, a rise in January has resulted in gains for the rest of the year 90% of the time since 1950. While these are good odds, it does not say anything about the magnitude of the gains. So we’ll have to wait another 11 months to find out for sure if this will be an odds defying year or not.

Here’s a reader question that comes up on a regular basis:

As an employee of the xx company, I manage my Federal Thrift Savings Plan. If I get stopped out, what rules should I use to re-enter the market? I know you must get this question a couple of times a week but I couldn’t find the answer in your past postings.

Re-entering after having experienced a whipsaw signal is always a challenging task. There are no hard and fast rules and much depends on the individual’s risk tolerance. I can suggest several scenarios for you.

Let’s assume the high price a fund has reached, since you bought it, is $10, and the market starts to decline. If you apply the 7% sell stop rule (for domestic and international funds/ETFs), you should be pulling the trigger once the fund breaks through a price point, on a closing basis, of 9.30 or thereabouts.

You now have 3 options:

1. You can replace this fund with another one that is currently in an uptrend

2. If you are conservative, you can repurchase this fund once it takes out its old high of $10. That presumably would tell you that the uptrend has resumed, but, depending on market activity, it can be a long way back to reach that point.

3. If you are more aggressive and want to re-enter sooner, pick a price that is 2% above the 9.30 level you got stopped out of. That will get you in the market sooner, but it also can set you up for another whipsaw if this trend reversal does not hold.

As I said, there is no perfect way, and you can use any other percentage that you are more comfortable with. The only thing I recommend is that, once you have decided on that re-entry number be consistent with it.