Optimistic October Is Bringing Bullish S&P 500 Bets Back to Life

Down about 20% for the year, the S&P 500 is having an optimistic October, rising about 4% the past month to give bullish traders hope that the market could turn around before year’s end. This runs counter to what is typically a notoriously bearish month for the markets.

More inflation fears and rate increases pushed stocks deeper into the red during September after a brief rally in the summertime. October is notorious for market crashes historically, but so far so good.

“October may be famous for historically horrifying stock market crashes like the ones in 1929, 1987, and 2008,” a CNN report said. “But so far this month, there’s nothing for investors to be scared of on Wall Street. Stocks enjoyed another solid rally Monday, continuing a hot streak for the markets this month.”

Fresh off another 75-basis point rate hike, the U.S. Federal Reserve’s aggressive rate-hiking policy has been a constant narrative for much of the year. The hope now is that the Fed will dial back on its tightening of monetary policy, allowing the markets to regain confidence that a recession will no longer be on the horizon.

“But the market has rallied this month on hopes that the Federal Reserve may soon take a break from its series of aggressive rate hikes to fight inflation,” the report said further. “More big rate increases are expected at the Fed’s next meeting on November 2 as well as in December. Still, some hope the Fed may pause hikes in 2023.”

The optimism is feeding into strength for the Direxion Daily S&P 500 ® Bull 3X Shares ETF (SPXL). The fund has risen close to 10% within the last five days.

SPXL Chart

SPXL data by YCharts

More Volatility Ahead? Options Traders Think So

Despite the latest rally, it doesn’t mean the bumpy rides are over. In fact, the activity of options traders is forecasting that more market volatility could be ahead, especially when it comes to the tech sector.

“Options traders appear to be betting the volatility will continue over the next week, when several big tech companies report their earnings results,” a Wall Street Journal report noted.

Given this forecast, when it’s time to become a bull, traders can opt for the Direxion Daily Technology Bull 3X ETF (TECL). The fund seeks daily investment results that are equal to 300% of the daily performance of the Technology Select Sector Index.

When tech exhibits weakness, bearish traders can look for the opposite. That inverse play is available in the Direxion Daily Technology Bear 3X ETF (TECS).

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