Big market swings seen at the end of the day in recent trading are thought to be a result of leveraged ETFs. The leaveraged funds (aka: ultra) are buying and selling (shorting) at a margin rate of three to one. The major volatile swings in the stock market occur when a back log of these trades flood the system and massive amounts of capital shift the balance in one direction or the other. Somehow at 3pm all the orders for these massively leveraged funds start crossing the wires and that has caused the market to go up or down by 400 plus points at or near the end of the trading sesion.
DDM - Ultra Dow 30
UYG - Ultra Financials
UXI - Ultra Indutrials
USD - Ultra Semiconductor
DIG - Ultra oil and gas
All of these ultra funds have there equivilant twin to the short side as well. One of my favorites has been the EEV(ultra short emerging markets). My big question is how do we determine the ultras are generating market volitility? Do these funds really have the power to move the market up or down 500 points? I get the whole concept of leverage creating more buy or sell orders but why didn't these funds move more than they did on friday? These funds can be a rewarding way to ride the tide in a boat to recovery but it's a lazy way to invest and I don't condone the risk. Google ishares or Proshares, there you can search for ulra longs and shorts.