A fourth-quarter rally is underway, but whether or not it can sustain itself is anybody’s guess. One thing is for sure, the market volatility is opening up opportunities for traders when it comes to the movements of the S&P 500.
Fundamentally, investors are still having to contend with the ongoing tide of rising interest rates and whether or not the U.S. Federal Reserve will continue to tighten monetary policy, eventually to the detriment of economic growth. Technically, however, a rally could be set up nicely, according to Morgan Stanley.
“Morgan Stanley’s long-time equities bear says U.S. stocks are ripe for a short-term rally in the absence of an earnings capitulation or an official recession,” a Bloomberg report noted. “A 25% slump in the S&P 500 this year has left it testing a ‘serious floor of support’ at its 200-week moving average, which could lead to a technical recovery, strategist Michael J. Wilson wrote in a note on Monday.”
A short-term rally could set up a nice trade for leveraged exchange traded funds (ETFs), allowing for the maximization of profit with additional leverage. Inverse ETFs can also provide a tactical advantage should bullish bets turn the other direction or if traders want to simply extract the most profit from their bearish convictions.
Riding the S&P 500 Roller Coaster
When it comes to trading the S&P 500, investors don’t have to wait idly and buy the dips, then wait for the next bullish move higher. Advanced investors can trade both bullish and bearish moves using Direxion leveraged ETFs.
To profit on the downside in the short term, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS). SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
On the flip side, when the S&P 500 rises, traders can play to the upside with the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). Both ETFs offer thrice the leverage, so seasoned traders only should use these products.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.