The S&P 500 was riding a 5-day winning streak before Tuesday’s speed bump, but traders can still use the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL ) if their bullish intuition is strong.
Market tailwinds like the infrastructure plan passing through the Senate and the notion that inflation has peaked have been bringing risk back into the market. The S&P 500 has largely benefitted from this sentiment.
On the economic data front, retail sales have declined, but some market experts see this as a temporary blip on the radar.
“When we’re looking at the expectations for consumer strength going forward, some of the edge is being taken off by the rise in the delta variant,” BMO Wealth Management’s Yung-Yu Ma said in a CNBC report. “These challenges aren’t going to go away quickly.”
SPXL, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
Right now, SPXL is trading well above its 200-day moving average and its 50-day moving average (MA). Speaking to the latter, the fund has been ticking higher every time it touches the 50-day MA trend, which could present an area of value for traders to gauge a price entry point.
In terms of momentum, SPXL still sits below overbought levels. The fund is up over 60% for 2021.
Playing the Flip Side
On the flip side of the trade, the geopolitical situation in Afghanistan and rising Covid-19 infections could push the S&P 500 lower. Traders can also play the inverse side with the Direxion Daily S&P 500 Bear 3X ETF (SPXS ).
SPXS seeks daily investment results equal to 300 percent of the inverse of the daily performance of the S&P 500 Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80 percent of the fund’s net assets (plus borrowing for investment purposes).
“When we’re looking at the expectations for consumer strength going forward, some of the edge is being taken off by the rise in the delta variant,” BMO Wealth Management’s Yung-Yu Ma said. “These challenges aren’t going to go away quickly.”
For more news and information, visit the Leveraged & Inverse Channel.