massive short-term moves higher. And with the leverage and small cash layout through using options on ETFs, big potential gains were possible. We saw a mini-run on Financials in recent weeks, and yesterday the markets reacted very negatively to Treasury Secretary Geithner not laying out enough specifics in his much anticipated presentation.

Is RFN headed higher?

Let's take a look at the Rydex Inverse 2X S&P Select Sector Financial (RFN) ETF. This ETF seeks to replicate 200% of the inverse daily performance of the Financial Select Sector Index (XLF). With the XLF dropping, what better way to profit than finding a sector that doubles the inverse of the poor performance? Exactly, take those lemons and try your best to make lemonade.

RFN Weekly Chart


A weekly chart of RFN may not instill a lot of confidence, but there are two points you should find interesting. First, the ETF finally used the round-number 40 level as support. This level has had its chances in the past and failed, so perhaps we could see the new support hold.

Second, note that there was a major volume spike with last week's drop. The last time volume was this high also accompanied a drop. Big deal? Notice the performance of RFN in the three weeks following the first drop - the ETF advanced steadily. Could this happen again? Sure. Will this happen again? Obviously this is not a certainty, and Inverse (and Ultra-type) ETFs do offer big risk along with the big rewards.

With the picture looking bleak for banks, this ETF could ride the support of its 20-week moving average higher. If this is the case, the first potential resistance for RFN is at the 55 level, but a close above 50 may be more significant. If the shares can overtake 50 once and for all, it could provide the kind of support that springboards the stock higher. Just something to chew on as financials face a tough road.

Price Headley is the founder and chief analyst of BigTrends.com.