The Direxion Daily Technology Bear 3X ETF (TECS) gained 5% during Wednesday’s trading session as a tech sell-off ensued, following inflation data showing that the consumer price index reached a three-decade high.
TECS seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the daily performance of the Technology Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector.
“The tech-heavy Nasdaq 100 Index is showing serious signs of overheating, an indication that a selloff might be right around the corner,” a Bloomberg report says.
“After surging 10% in the past month, the benchmark — home of the likes of Apple Inc., Amazon.com Inc. and Microsoft Corp. — has seen its relative strength indicator, a 0-100 gauge of bullish and bearish price momentum, soar to 78, well into overbought territory,” Bloomberg adds. “That’s seen by traders as a contrarian signal that a decline is imminent, because buying has gotten excessive. Four of the last five times the indicator hit such a level, the Nasdaq 100 shed 12% or more to the ensuing low.”
Trading Inflation With Other ETFs
The retail sector is another area to look for opportunity. As prices push higher, this could be of benefit to the Direxion Daily Retail Bull 3X ETF (RETL), especially with holiday shopping season in full swing.
“I do think we’re moving into a new phase where inflation is broader and where things are going to get a little more intense,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “Part of that reflects that [supply-chain] bottlenecks aren’t resolved going into the holiday season, when a lot of purchases get made, and that the economy is doing really well, so you have strong demand.”
Another area to look is the energy sector, especially with the spike in oil and gas prices. This could feed into more strength for leveraged funds like the Direxion Daily Energy Bull 3X Shares (ERX).
ERX seeks daily investment results equal to 200% of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector, which includes the following industries: oil, gas, consumable fuels, and energy equipment and services.
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