As hot air slowly empties from the Reddit retail trading mania, the markets can re-focus on where the money is actually flowing. Traders the past week have been moving into leveraged ETFs from Direxion that focus on semiconductors, financials, and inverse S&P 500 stocks.
The highest 1-week flows continue to focus on technology, but especially in the semiconductor industry via the Direxion Daily Semiconductor Bull 3X ETF (SOXL). SOXL seeks daily investment results equaling 300% of the daily performance of the PHLX Semiconductor Sector Index.
The fund invests at least 80% of its net assets in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index measures the performance of domestic companies engaged in the design, distribution, manufacture, and sale of semiconductors.
Right now, the semiconductor industry is facing the problem of meeting supply due to high demand. With chips becoming scarce, this could prop up semiconductor ETFs in 2021.
“Over the last several months, semiconductor makers have been unable to keep up,” an Investorplace article said. “The reasons behind the supply-demand imbalance are unclear, and have resulted in a lot of finger pointing. For investors, those reasons are almost secondary. They want the car companies they like to keep making cars, and they want consumer electronics companies to keep producing gadgets. Slowdowns are a cause for concern… especially with an unclear end in sight.”
Financials and S&P 500 Bears
With fourth quarter earnings reports underway, traders are bullish on financials with the Direxion Daily Financial Bull 3X ETF (FAS) seeing the second highest 1-week flows. FAS seeks to track a subset of the Russell 1000® Index that measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market.
“The financial sector has produced the biggest upside surprise so far, as EPS growth turned to a positive 14.8% from a negative 23.7% as of Sept. 30,” a MarketWatch report noted.
One bear balances out the two bulls in the provider’s top three.The Direxion Daily S&P 500 Bear 3X ETF (SPXS) seeks daily investment results equal to 300 percent of the inverse of the daily performance of the S&P 500 Index.
Even with the vaccine rollout underway, Covid-19 will still be daunting challenge in 2021. Despite this, the S&P 500 index is up 3.48% year-to-date.
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