We have urged people to but this ETF as a hedge if they hold stock. But after the lows in early April (where the HXD was the precise inverse of the HXU) we were a little but more excited about this ETF, even calling it top-pick. From an EW point of view these wiggles are very difficult to discern and count. A wild guess would be a series of 1-2,1-2s . This one could go a long way considering that it was as high as $40+.
Everyone that owns stock should own some of this stuff. Since hitting lows of around $7.80 in March and April the HXD has gradually worked its way up, a break-out if you wish, to the present level of $9.36, up about 20% against a market that is down about 10% so it tracks as advertised by 2 to 1. This is a great hedge!
Why hedge? Why not just sell the existing position? The answer is that your broker truly knows what he is doing and therefore his picks will outperform the market, so you want to keep them while you want to reduce your exposure to the market overall. Tax and commission considerations may play a role as well.
This is our favorite instrument. $8 was always an interesting point as that is where the inverse HXU traded at the lows in March of 2009, see below;
A difference of only $0.08, and it has now held for the better part of two months. And the HXU did a fairly straightforward A-B-C, which, by definition , is a corrective move. I think the time has come (or passed already) to buy the HXD. even at today’s price of about $8.65 or so. The Fed etc.etc. can not continue this shell game. The simple reality is that the world has mis-allocated roughly 3 trillion dollars or more, perhaps a lot more. By kicking the can down the road time is won but the question remains – as always – who is going to pay, bondholders, equity holders or taxpayers. Inevitable there will be a very serious headwind when we find out.
Here is the TSX again, just as a reminder where we are in the big picture. 
According to Bloomberg/Businessweek the S&P, based on one measure of volatility, hasn’t risen this much amid price swings this narrow since 1971. We had ourselves observed earlier that the TSX had never in it’s entire history, had an absolute move this size, and that was a hundred points ago.
This alone should be a warning that things may just be a little ahead of themselves. The Fed. has been behind much of this by way of QE2 and more importantly coercing the market .Their word has been gobbled up like gospel, but in the end they are powerless to change market forces. So, where are we now on the TSX? Here is the same chart of a few weeks ago updated to today. I am , of course, surprised that we got above the 12000 level, but now that we are here it is good to see where this might go. The purple circle in the above chart represents a “cluster” of different measurements that could ultimately determine where this is going, that is if the whole thing is not already turning today. The cluster consists of:
1.The parallel trend-line through the top of wave 3, where we are now at about 14200.
2.The double-top on a monthly basis, about 14500.
3. The all time high at around 15150.
4. The point where c equals a in an a-b-c B-wave, about 15100.
5. The point where S = R= Q (light blue) at around 15200
6. The parallel trend-line through the top of wave 5, also at 15200
7. The next higher point would be where waves 5 and B are vector equal at 16500 if straight up. More logical would be to have some time go by which would lower that point (move along the red circle). This is highly unlikely as the intersection of the red circle with either parallel trend-line is at least 2 years away! To make a long story short, this market realistically has 7% max. to the upside. Time to buy HXD.
Without all the clutter, here is the DOW as well.
Notice that of the , give or take, 70 years that is covered by this chart all of 1 1/2 were spent at levels higher than we are today.