Bullish Bets on the S&P 500 Rising, Thanks to Retail Traders

Sometimes a metric can portend to a contrarian view as opposed to confirming a trend. That’s the case with the IG Client Sentiment (IGCS), which could suggest that retail traders are ready to continue increasing bullish bets on the S&P 500.

The S&P 500 is up just under 7.5% for the year though recent market volatility has the index somewhat in a range-bound trend, particularly if the pattern persists. The aforementioned IGCS metric shows that retail traders could be re-positioning their bets to skew towards more upside ahead though the current volume favors the bearish trend.

“For the most part, the Dow Jones and S&P 500 have been maintaining range-bound price action since the end of last year,” a Daily FX article said. “While price action might have been stable, retail trader positioning has been evolving. This can be seen by looking at IG Client Sentiment (IGCS). The latter can at times function as a contrarian indicator.”

According to IGCS, about 37% of retail traders are net-long the S&P 500. Since most traders are biased lower, this hints prices may continue rising,” the article added.

At the same time, there’s been more action on the bullish side. It appears retail traders are increasing their bets on more strength for the S&P 500 despite current economic headwinds, namely the potential of a recession amid rising interest rates and inflation.

“Meanwhile, upside exposure increased by about 2% and 4% compared to yesterday and last week, respectively,” the article added. “With that in mind, recent adjustments in positioning hint that the current price trend may soon reverse lower despite overall exposure.”

2 Options to Play the Volatility

As the S&P 500 continues to fluctuate, leveraged exchange-traded funds (ETFs) from Direxion offer traders to play both sides without the use of a margin account. With leverage built into the fund, traders can maximize profits regardless if they’re bullish or bearish.

When the S&P 500 rises, traders can play to the upside with the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). To profit on the downside in the short term, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS), which seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.

For more news, information, and strategy, visit the Leveraged & Inverse Channel.