In recent recaps our market technician David Chojnacki has pointed to the SPX (S&P 500 Index) 1415 and 1425 levels as being areas of potential technical resistance, and sure enough, a short lived rally all the way up to 1426.68 yesterday was
met with reasonably heavy selling pressure, bringing the SPX down to 1413.17 on the close.
What began as an early day breakout to new 2012 highs, ended with a close below the “last level” of technical resistance prior to 1425 (that being SPX 1415).
Thus, as one might expect, “inverse” products saw accelerated activity yesterday in midst of this “fail” in the SPX, and call buyers surfaced in ProShares UltraShort S&P 500 (NYSEArca: SDS).
Similarly, volume spiked in Direxion Daily S&P 500 Bear 3X (NYSEArca: SPXS) as well as in ProShares Short S&P 500 Fund (NYSEArca: SH) which is a three times daily leveraged “Bear” S&P 500 product and an unleveraged inverse ETF respectively.
With the week of August 31st through September 7th expected to be pivotal in determining if the recent “bull run” has legs, it is not terribly shocking to see bears enter the picture with the market trying to break out to new highs, or at the very least profit takers to emerge.
From a technical standpoint, we do see SPX 1405 as an area of support, so it will remain to be seen if the intra-day reversal yesterday is simply part of a healthy pullback or perhaps there is more bloodletting to come given the uncertain “macro picture” that may be sorted out in the near term.
Direxion Daily S&P 500 Bear 3X
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at email@example.com.