Depression after rate hike pulls this leveraged ETF higher

EAlthough financial markets have already readjusted in preparation for a rate hike by the Federal Reserve, the depression that followed the hike was behind the most recent sell-off.

the Direxion Daily S&P 500 Bear 3X ETF (SPXS), however, has been profitable so far. During Thursday’s trading session, SPXS ended the day up 10%, which is a sign of the times in major stock indices.

Traders can take advantage of the inverse strength of the S&P 500 with SXPS. The fund targets daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.

For the year, SPXS is up more than 35%, underscoring inflation fears that rocked the S&P 500 in 2022. Markets expect further tightening, which could pull SPXS further higher if a rally cannot bring the S&P 500 back to life.

“Despite the tightening we have seen in financial conditions over the past few months, it is clear that the Fed would like to see them tighten further,” mentioned Zachary Hill, Head of Portfolio Strategy at Horizon Investments. “Higher equity valuations are inconsistent with this desire, so unless supply chains heal quickly or workers return to the workforce, any rally in equities is likely on hold as messages from the Fed are becoming more hawkish again.”

“Truly extraordinary” market moves

Needless to say, there have been unprecedented moves in the market so far in 2022. Volatility, based on the CBOE Volatility Index (VIX), has soared to over 80% three times this year, and we only have one term.

“If you go up 3% and give up half a percent the next day, that’s pretty normal. … But to have the kind of day we had yesterday and see it reverse to 100% in a half – day is really extraordinary “, mentioned Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

VIX chart

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