As investor fears of a global economic slowdown rise following the latest rate hike by the Federal Reserve, it’s stoking the fire for more Direxion Daily S&P 500 Bear 3X ETF (NYSEArca: SPXS) gains.
As the S&P 500 fell 1.58 percent, SPXS fed off the declines with a 4.81 percent gain on Thursday.
The markets were set adrift in a sea of red following Wednesday’s announcement by the Federal Reserve that it will raise interest rates by another 25 basis points. Federal Reserve Chair Jerome Powell sent dovish signals with the prospect of only two rate hikes rather than three, but the capital markets apparently didn’t see enough doves.
“The market’s in no man’s land,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.
SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500® Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund’s net assets.
With investors hoping for a Santa Claus rally following the rate hike announcement, it appears the prospects are only getting slimmer. Now, the possibility of gains rests in the hands of a U.S.-China trade deal coming into fruition.
“From our point of view time wise, we think this correction has further to run, consistent with the past over 10 percent corrections since March 2000,” said Emanuel. “Does it have further to run? That will be much more dependent on whether the data starts turning down in a much more meaningful way, and if there’s no signs of tangible … progress in negotiations with China.”
Other Leveraged S&P 500 ETFs
While equities investors have been rattled by the latest volatility spikes, traders can take advantage of the market oscillations with other leveraged S&P 500 ETFs, such as the Direxion Daily S&P 500 Bull 2X ETF (NYSEArca: SPUU), Direxion Daily S&P500 Bull 3X ETF (NYSEArca: SPXL) for gains and the Direxion Daily S&P 500 Bear 1X ETF (NYSEArca: SPDN) for declines.
“It is entirely possible that looking out over the next three to six moths this correction turns into what you would call a bear market because of the fact that the Fed really didn’t show sufficient sensitivity to the affect of policy tightening on the speed of asset price changes to the downside,” said Julian Emanuel, chief equity and derivatives strategist at BTIG.
SPUU seeks daily investment results equal to 300% of the daily performance of the S&P 500® Index. SPUU invests at least 80% of its net assets in 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.
SPDN seeks daily investment results equal to 100% of the inverse of the daily performance of the S&P 500® Index. The fund invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse (opposite) or short exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).
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