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Time To Talk Tech With Leveraged ETFs

ETF Professor

It is time to talk technology. Technology sector earnings that is. This week, a slew of components in the widely followed Technology Select Sector Index (IXTTR) report quarterly results.

Among the notable technology companies reporting earnings this week are Advanced Micro Devices, Inc (NASDAQ: AMD), Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOGL) and Intel Corporation (NASDAQ: INTC).

What Happened

Technology is one of the best-performing sectors in the S&P 500 this year as highlighted by a year-to-date gain of 9.48 percent for the Technology Select Sector Index.

“The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the S&P 500 for Q3 2018 is 19.1%, and the blended revenue growth rate for the index is 7.3%,” according to FactSet.

Only real estate is expected to have better profit margins than tech for the third quarter, but over the past five years, tech's profit margins are easily the best among S&P 500 sectors.

Why It's Important

This week's tech earnings avalanche puts the spotlight on the Direxion Daily Technology Bull 3X Shares (NYSE: TECL) and the Direxion Daily Technology Bear 3X Shares (NYSE: TECS).

View more earnings on TECS

The bullish TECL tries to deliver triple the daily returns of the Technology Select Sector Index while the bearish TECS looks to mimic triple the daily inverse returns of that benchmark. Alone, Microsoft is 17 percent of that index's weight.

This week, over 39 percent of the components in the Technology Select Sector Index step into the earnings confessional, according to Direxion data. Next week, 27 percent of the index's member firms report earnings.

What's Next

Leading up to this week's tech earnings onslaught, positioning in the leveraged tech ETFs has been decidedly bullish. Over the past month, the bullish TECL is averaging daily inflows of $2.76 million while the bearish TECS is averaging daily outflows of about $88,400, according to Direxion data.

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