Any sliver of news that feeds into the higher-for-longer interest rates narrative will be an unwelcome guest for tech bulls. For traders looking to feed off bearishness, it’s an opportunity to take advantage of inverse exchange traded funds (ETFs).
The market rally was going to hit the proverbial speed bump at some point given that the momentum from 2023’s late rally picked up again near the end of January and through February. Big tech, or more specifically artificial intelligence (AI), has been leading the pack and at some point, the principles of market physics were going to take effect. Indeed, tech went up, but it subsequently went down. Yet market corrections and increased volatility are exactly what traders need to play the markets.
In the long term, don’t expect tech’s recent weakness to continue. The Federal Reserve has yet to cut interest rates, opting to stay on the sidelines until it sees enough inflation data to confirm that cuts are necessary. When cuts do eventually happen, that could fuel another tech rally. Household tech names like Nvidia should continue their upward trajectory.
“It doesn’t mean that the longer-term upside potential is over,” said Sam Stovall, chief investment strategist at CFRA Research, in a CNBC report. “It just says that maybe we’ve gotten ahead of ourselves: We’ve gotten to an overbought situation, and it’s time to take some profits.”
3x Both Sides of the Trade
As mentioned, if there’s any continued volatility stemming from economic data proving that inflation is still running hot, traders should bask in the market movements. When downside takes place, consider using the Direxion Daily Technology Bear 3X ETF (TECS), which seeks daily investment results equal to 300% of the inverse (or opposite) of the daily performance of the Technology Select Sector Index, which is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector.
Given the tech sector’s dominance in the S&P 500, any further short-term weakness can also benefit the Direxion Daily S&P 500 Bear 3X ETF (SPXS). The fund seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
Of course when, if the rally continues, traders can jump back on the bullish wagon with the Direxion Daily Technology Bull 3X ETF (TECL). Likewise, when the S&P 500 exhibits upside again, they can use the Direxion Daily S&P 500 Bull 3X Shares ETF (SPXL).
When using a one-month chart, the up and down movements of all four funds can be enough to induce an ocular migraine. That said, it creates an environment where traders can play both sides with thrice the leverage to maximize gains.
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