Which Leveraged ETFs Are Seeing Colossal Inflows?

Are traders souring on small caps and running with the bulls on tech? The past week saw the strongest inflows in leveraged Direxion products, particularly the Direxion Daily Small Cap Bear 3X Shares (TZA) and the Direxion Daily Technology Bull 3X ETF (TECL).

A Pair of Leveraged Direxion ETFs With Highest 1-Week Fund Flows 1

Small cap strength was evident at the start of 2021, with the Russell 2000 up close to 20% in mid-March before correcting itself in April. Some analysts are pointing to the possibility of inflation fears stifling small caps.

“It hangs like the sword of Damocles over the small caps right now,” Schlossberg told CNBC’s “Trading Nation.” “Producer prices both from the production squeeze and just from the input costs could really have a material impact because I don’t think small caps have the pricing power right now in the marketplace to really pass that on to the consumer, and if they don’t, their margins are likely going to be squeezed.”

^RUT Chart

TZA seeks daily investment results of 300% of the inverse (or opposite) of the daily performance of the Russell 2000® Index. The fund 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.

The index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000® Index, based on a combination of their market capitalizations and current index membership.

TZA Chart

Still Bullish on Tech?

Technology has been the go-to play after the pandemic sell-offs in March of last year. With big tech companies like Microsoft and Apple releasing earnings, tech traders may be erring on the side of bullishness given the strong earnings results.

With its triple leverage, TECL is certainly not for the weak of heart. The fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index.

The fund, which is up over 220% the past year, invests at least 80% of its net assets (plus borrowing for investment purposes) 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 includes domestic companies from the technology sector.

TECL Chart

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