Why Direxion's 'TNA' ETF Is Dominating One-Week Inflows

Up almost 50% for the year, it’s easy to see why the Direxion Daily Small Cap Bull 3X Shares (TNA) dominated Direxion’s one-week inflows.

Coming in second and third place are the Direxion Daily S&P Biotech Bull 3x Shares (LABU) and the Direxion Daily Semiconductor Bull 3X ETF (SOXL), respectively.

This Direxion Small Cap Leveraged ETF Dominated One-Week Inflows 1

As for TNA, it tracks the Russell 2000 Index and seeks daily investment results equal to 300% of the daily performance of the index. With the extra leverage in place, the ETF is actually up about four times the index in its year-to-date performance.

TNA Chart

A Young Bull Market Rife for Small Cap Gains

The pandemic certainly put a bearish spin on a maturing bull market that analysts suggested was peaking. Now that a global vaccine rollout is underway, small caps could stand to benefit should the bull market resume its upward trajectory.

“This could turn out to be a very big year for the relatively young bull market,” wrote Sean Williams in The Motley Fool. “The Federal Reserve has pledged to keep lending rates at or near historic lows through 2023, and the Biden administration is fine-tuning a plan to spend as much as $1.9 trillion on a new fiscal stimulus package. This would come atop the more than $3 trillion spent last year in response to the coronavirus disease 2019 (COVID-19) pandemic.”

“With access to cheap capital readily available, businesses of all sizes should benefit. However, it might be especially good news for small-cap stocks,” added Williams. “Following the March 2020 bottom, we’ve watched established and/or high-growth large-cap businesses thrive. Meanwhile, small-cap stocks (publicly traded companies with a market cap ranging from $300 million to $2 billion) have mostly lagged. But with so much available capital and investors’ appetite for risk returning, this trend may be ready to reverse.”

Looking at the one-year chart in the Russell 2000 index, momentum looks strong given its technical indications. The index is under overbought levels per its relative strength indicator (RSI).

Furthermore, the moving average convergence divergence (MACD) indicator shows the exponential moving average (EMA) currently below the signal line, which could signal a buying opportunity for traders looking for an area of value.

Novice investors should note that with TNA they are exposed to thrice the gains of the index. Conversely, losses are magnified by three times.

^RUT Chart

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