“All these different underlying sentiment indicators are saying we could have a little bit of pullback here,” Tim Gordon of TradingAnalysis.com told CNBC. “Eventually I think the market stabilizes and we rally into 2016, but a pullback looks imminent.”
Consequently, ETF traders who are concerned about the prospects of a market pullback may include inverse strategies to help hedge their long equities exposure.
For those who are wary of a potential pullback in the S&P 500 index, 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. [Do You Know How Your Leveraged ETFs Work?]
As the SPDR S&P 500 ETF (NYSEArca: SPY) dipped 1.3% over the past month, SH returned 1.1%, SDS rose 2.1%, SPXS increased 2.8% and SPXU advanced 2.9%.
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Max Chen contributed to this article.