Many market participants have heard of the “sell in May and go away” mantra, with good reason as equities and stock exchange traded funds typically experience their worst month of the year in June.
June has been the worst month for stocks over the past decade, with the S&P 500 averaging a 1.32% decline over the last 10 months of June, reports Laurie Kulikowski for TheStreet.
“June will be here quickly, and it has been by far the worst month for stocks over the last 10 years,” Jonathan Krinsky, chief market technician at MKM Partners, said in a note. “Therefore, some weakness into early summer would not be surprising, but in our view that would set-up a buying opportunity in July.”
For those who are wary of a potential pullback in the S&P 500 index this month, there are a number of bearish or inverse ETF options with varying levels of leveraged exposure to capitalize off a weakening S&P 500. The ProShares Short S&P500 (NYSEArca: SH) takes a simple inverse or -100% daily performance of the S&P 500 index. Alternatively, for the more aggressive trader, leveraged options include the ProShares UltraShort S&P500 ETF (NYSEArca: SDS), which tries to reflect the -2x or -200% daily performance of the S&P 500, the Direxion Daily S&P 500 Bear 3x Shares (NYSEArca: SPXS), which takes the -3x or -300% daily performance of the S&P 500, and ProShares UltraPro Short S&P 500 ETF (NYSEArca: SPXU), which also takes the -300% daily performance of the S&P 500. [Inverse S&P 500 ETF Ideas to Hedge a Correction]
Alternatively, investors can also capitalize off the fall in the widely viewed Dow Jones Industrial Average through the ProShares Short Dow30 ETF (NYSEArca: DOG), which tries to reflect the -100% daily performance of the Dow Jones Industrial Average. For the more aggressive traders, the ProShares UltraShort Dow 30 ETF (NYSEArca: DXD) takes the -200% of the Dow Jones and the ProShares UltraPro Short Dow30 (NYSEArca: SDOW) reflects the -300% of the Dow. [Do You Know How Your Leveraged ETFs Work?]
Lastly, the ProShares Short QQQ ETF (NYSEArca: PSQ) takes the inverse or -100% daily performance of the Nasdaq-100 Index. For the aggressive trader, the ProShares UltraShort QQQ ETF (NYSEArca: QID) tracks the double inverse or -200% performance of the Nasdaq-100, and the ProShares UltraPro Short QQQ ETF (NasdaqGM: SQQQ) reflects the triple inverse or -300% of the Nasdaq-100.
Krinsky, though, pointed out that the pullback will only be temporary as the month of July has averaged a 1.68% gain over the past decade. [Slow Start Augurs Strong Finish for Dow ETFs]
Consequently, after the June pullback, investors could ride the potential rally in July with broad equities or leveraged ETF options. For example, the ProShares Ultra S&P 500 ETF (NYSEArca: SSO) reflects the 2x or 200% daily performance of the S&P 500, the ProShares UltraPro S&P500 (NYSEArca: UPRO) takes the 300% performance of the S&P 500 and Direxion Daily S&P 500 Bull 3X Shares (NYSEArca: SPXL) also reflects the 300% performance of the S&P 500.
The ProShares Ultra Dow30 (NYSEArca: DDM) takes the 2x or 200% daily performance of the Dow, and the ProShares UltraPro Dow30 (NYSEArca: UDOW) takes the 3x or 300% daily performance of the Dow.
Lastly, the Ultra QQQ ProShares (NYSEArca: QLD) takes the double or 200% daily performance of the Nasdaq-100 and the ProShares UltraPro QQQ (NasdaqGM: TQQQ) mirrors the triple or 300% daily performance of the Nasdaq-100.
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Max Chen contributed to this article.