Market maven Jim Paulsen is brimming with confidence that a breakout will occur before year’s end. August’s market doldrums are setting up for an equally tepid September, but it will create market opportunities for savvy investors.

“We almost have a fear bubble. That’s our primary thing that sits out there for me,” said Paulsen. “People are not loading into stocks even though we’re really close to market highs. They’re loading into bonds even though they have close to record low yields… The behavior just screams fear.”

Trade wars will continue to play a hand in the latest market oscillations, but the recent pullbacks could present buy-the-dip opportunities for leveraged exchange-traded funds (ETFs). Just as President Donald Trump announced new tariffs and then scaled back on certain items on the list of Chinese products, the markets were sent on a volatility rollercoaster ride.

The investors’ wall of worry, however, could be perfect for a breakout.

“If you pierce a fear bubble, do you have a big rally? And, I kind of think that’s one of the contributing factors to the upside,” said Paulsen. “If we find out it turns out better than feared, many, many portfolios are under-allocated to risk assets and will have to re-adjust themselves trying to get more risk which could drive risk assets a lot higher.”

Traders can take advantage of these markets movements in the S&P 500. For those especially looking for juicing up their trades, there are leveraged exchange-traded fund (ETF) options available.

Potential leveraged ETF plays in the Direxion Daily S&P500 Bull 3X ETF (NYSEArca: SPXL) and the Direxion Daily S&P 500 Bear 3X ETF (NYSEArca: SPXS) could have traders placing these ETFs on their watch lists.

SPXL seeks daily investment results of 300% of the daily performance of the S&P 500 Index. The fund, under normal circumstances, 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.

SPXS seeks daily investment results, of 300% of the inverse (or opposite) 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 (plus borrowing for investment purposes).

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