Omicron-Inflation Combo Could Be Pushing This Bearish Internet ETF Higher

Major factors affecting downward pressure on equities right now could be either the Omicron variant or inflation and for tech stocks right now, it’s a combination of both.

This is helping to push the Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS) to over 30% gains on the year. The rising Covid cases are certainly making for supply chain management issues across the globe.

“The spike in inflation comes as a new Covid variant emerges and supply-chain bottlenecks persist,” an Investor’s Business Daily article noted.

WEBS seeks daily investment results equal to 300% of the inverse of the daily performance of the Dow Jones Internet Composite Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets.

The index includes companies that generate at least 50% of their annual sales/revenue from the internet, as determined by the index provider. With its triple leverage, WEBS certainly isn’t for risk-averse investors so only advanced/experienced traders should only apply.

WEBS Chart

WEBS data by YCharts

When Bullishness in Tech Returns

Despite the recent tick lower, it’s difficult to fathom that technology will remain down for long. This is especially the case given that the opposite end of the trade, the Direxion Daily Technology Bull 3X ETF (TECL), is up almost 100% in 2021.

Taking the bullish side of the trade, TECL seeks 300% of the daily performance of the Technology Select Sector Index. When looking at momentum via the relative strength index (RSI), the fund is still in between overbought and oversold levels, so a consolidation phase is in store if the indicator rings true to the form.

Long-term strength in the meantime is on the up and up with the fund trading well above its 200-day moving average. The same goes for the short-term horizon with TECL above the 50-day moving average.

The wild card, of course, will be the Omicron variant. Just how much of a disruption will the new variant be on the market moving forward?

Either way, volatility is good for traders in either TECS or TECL.

“Embrace the volatility, because it’s why investors are getting paid to own stocks,” said certified financial planner Brad Lineberger, president of Carlsbad, California-based Seaside Wealth Management.

TECL Chart

TECL data by YCharts

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