U.S. Markets close in 4 hrs 29 mins

How to Profit From Wall Street Crash With ETFs

ChannelAdvisor (ECOM) has been upgraded to a Zacks Rank 1 (Strong Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.

Probably nothing went right on Nov 20 with tech stocks tanking, each of the FAANG stocks slipping into bear market, global growth worries coming at the forefront, oil prices taking a dive and sharp selloffs in cryptocurrency market (read: Are We Headed Toward Bear Market? ETFs to Save Your Portfolio).

Rising rate concerns in the United States and no concrete signs of abatement in U.S.-Sino trade tensions and its impact on global growth are the main culprits. While both the factors dealt a blow to the overall market, high-flying tech names — known for lofty valuations — specifically took a hit.

Notably, some of FAANGs have come up with downbeat earnings and production report of late. Facebook FB, Amazon AMZN, Apple AAPL, Netflix NFLX and Google-parent Alphabet GOOGL have steadily declined over the last six weeks. Tech stocks started to lose luster starting October when the tech-heavy Nasdaq Composite index lost 9.2%, marking its steepest monthly decline since November 2008.

Coming to the oil patch, United States Oil USO lost about 7.2% on Nov 20. The fund is down 23% past month on concerns of rising output given softer-than-expected U.S. sanctions on Iran and waning demand amid weaker global growth forecast (read: Brent in Bear Market: 4 Country ETFs to be Cautious About).  

Notably, the International Monetary Fund (IMF) lowered its global growth forecasts on concerns between the United States and its trading partners. The IMF now expects the global economy to expand 3.7% this year and next year — down 0.2 percentage points from the previous forecast.

Bitcoin prices have also been falling sharply with Bitcoin USD (BTC-USD) plummeting about 69% this year. Most recently, it slid to $4,279, marking the lowest in the last 13 months. In late-2017, the cryptocurrency had scaled to as high as $19,870.62.

Market Impact

The result of these negative developments is a bloodbath in the markets. The three big U.S. ETFs SPDR S&P 500 ETF SPY (down 1.8% on Nov 20), SPDR Dow Jones Industrial Average ETF DIA (down 2.1%) and Invesco QQQ Trust QQQ (down 1.8%) lost massively. The S&P 500 (down about 1.2%) and the Dow Jones (down 3.3%) are now in the red for the year while Nasdaq Composite is up just 0.1%.

How to Profit?

Given the upheaval, investors could easily tap the opportunity by going short on global equities, at least for the near term. Below we highlight a few.

Dow Jones

Investors looking to play against the tumbling Dow Jones may tap ProShares Short Dow 30 DOG (up 2.2% on Nov 20), ProShares UltraShort Dow30 DXD (up 4.5%) and ProShares UltraPro Short Dow30 SDOW (up about 6.6%).

S&P 500

Investors can go against the S&P 500 with ProShares Short S&P500 ETF SH (up 1.9% on Nov 20) and Direxion Daily S&P 500 Bear 1X ETF SPDN (up 1.9%). 

Nasdaq

ProShares Short QQQ PSQ (up 1.8% on Nov 20), ProShares UltraShort QQQ QID (up 3.6%) and ProShares UltraPro Short QQQ SQQQ (up 5.3%) are good to play against the Nasdaq.

Technology

Technology stocks have taken the biggest blow. So, inverse tech ETFs ProShares UltraShort Technology REW and Direxion Daily Technology Bear 3X ETF TECS (up 6.3%) jumped more than 3.1% on Nov 20.

FANG

Given the mounting pressure on the FANG space, it is no wonder investors are looking to bet against it. MicroSectors FANG+ Index Inverse ETN GNAF is one such option (read: Leveraged FAANG ETFs: What Investors Need to Know).

Small-Cap

One can also short small-cap U.S. equities with ProShares Short Russell2000 RWM (up about 1.9% on Nov 20).

EAFE

ProShares Short MSCI EAFE EFZ (up 1.7% on Nov 20) could be a good way to short stocks from the EAFE region and avoid the spillover effect of the Wall Street sell-off.

Emerging Markets

If anybody wants to short emerging markets, ProShares Short MSCI Emerging Markets EUM (up 2% on Nov 20) would be their choice (read: ETFs to Benefit & Lose From a Strengthening Dollar).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
Facebook, Inc. (FB) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
SPDR-DJ IND AVG (DIA): ETF Research Reports
 
SPECIALTY - HEA (SH): ETF Research Reports
 
PRO-ULS DOW30 (SDOW): ETF Research Reports
 
US-OIL FUND LP (USO): ETF Research Reports
 
PRO-ULS QQQ (SQQQ): ETF Research Reports
 
PRO-SHRT DOW30 (DOG): ETF Research Reports
 
PRO-SH MSCI EM (EUM): ETF Research Reports
 
PRO-SH MSCI EAF (EFZ): ETF Research Reports
 
PRO-SHRT QQQ (PSQ): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report