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A Leveraged Bear ETF to Take Advantage of Investor Pessimism

This article was originally published on ETFTrends.com.

S&P 500 bear traders are feeling optimistic about the pessimism retail investors are exhibiting, which makes a prime play for the  Direxion Daily S&P 500 Bear 3X ETF (SPXS) . According to a survey by the American Association of Individual Investors, close to half feel the S&P 500 will be in negative territory in six months.

The 48.9 percent who see the S&P 500 in the red in six months' time registers the highest reading since April 2013. Furthermore, it represents an 18.4 percent jump from last week's reading as the capital markets were dominated by trade war worries.

Trade war fears have been seeping back into the markets as investor optimism surrounding the tariff war ceasefire between U.S. President Donald Trump and Chinese president Xi Jinping last week faded, causing the S&P 500 to dip below its 200-day moving average while the "death cross," a technical chart pattern term that could signal a major sell-off, looms.

Sell-offs in U.S. equities last week saw the S&P 500 cross below its 200-day moving average, while the 50-day moving average was in its sight, signaling the possible "death cross"--when a short-term moving average falls below the long-term moving average--a forecast that more pain could be ahead for U.S. equities.

Following October's bout with volatility that spilled over into November following the mid-term elections, the "death cross" is certainly not a welcome sign for investors. Hence, the increased pessimism--a welcome sign for S&P 500 bears and SPXS.

Leveraged S&P 500 ETFs to Play Volatility

While equities investors have been rattled by the latest volatility spikes, traders can take advantage of the market oscillations with other leveraged S&P 500 ETFs, such as the Direxion Daily S&P 500 Bull 2X ETF (SPUU) , Direxion Daily S&P500 Bull 3X ETF (SPXL) for gains and the Direxion Daily S&P 500 Bear 1X ETF (SPDN) for declines.

SPUU seeks daily investment results equal to 300% of the daily performance of the S&P 500® Index. SPUU invests at least 80% of its net assets in 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.

SPDN seeks daily investment results equal to 100% of the inverse of the daily performance of the S&P 500® Index. The fund invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse (opposite) or short exposure to the index equal to at least 80% of the fund's net assets (plus borrowing for investment purposes).

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