“Plan your trade and trade your plan.” ETF traders should exercise due diligence by using tools like ETF Database’s fund screener. Here are a few inverse funds that are looking good.
It’s been quite a year for bonds, which tend to fly under the radar when compared to equities. With investors dumping their capital into safe haven bonds while the Fed backstopped the bond market earlier this year, 2020 was an interesting one for the debt market.
One fund to keep an eye on is the Direxion Daily 7-10 Year Treasury Bull 3X Shares (NYSEArca: TYD). The fund seeks daily investment results equal to 300% of the daily performance of the ICE U.S. Treasury 7-10 Year Bond Index.
A relative strength index (RSI) filter on its 3-month chart shows it’s been trundling along under overbought levels and recently moved into oversold territory. Using a moving average convergence divergence (MACD) filter, the exponential moving average (EMA) line looks ready to cross up past the signal line, which could soon mean a buying opportunity.
Low Rates Could Affect Financials and Real Estate
Let’s take a look at the Direxion Daily Financial Bear 3X ETF (FAZ). FAZ seeks daily investment results that equate to 300% of the inverse (or opposite) of the daily performance of the Russell 1000® Financial Services Index.
FAZ’s RSI also shows it’s ready to dip into oversold levels in its own 3-month chart. Furthermore, the MACD shows the EMA line above the signal line, which means an area of value for buying could take place.
Low rates can affect bank profits in products like mortgages. The lower the rates, the lesser the profits for banks and, thus, it could be profitable to be a bear in financials that rely heavily on mortgage profits.
This brings us to real estate and the Direxion Daily MSCI Real Est Bear 3X ETF (DRV). DRV seeks daily investment results equal to 300% of the inverse of the daily performance of the MSCI US REIT Index, which is a free float-adjusted market capitalization weighted index that is comprised of equity REITs that are included in the MSCI US Investable Market 2500 Index.
Technically, via the 3-month chart, RSI could be heading into oversold levels at some point. Like FAZ, the EMA line is above the signal line.
It’s been a trying year for real estate as social distancing measures forced businesses to re-think their real estate holdings, particularly office space. As a global deployment of a Covid-19 vaccine continues and social distancing is still at the forefront for most of 2021, REITs that are too invested in office space or other affected commercial property could suffer.
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