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Wall Street Loses Maximum Since October: Inverse ETFs to Play

Sanghamitra Saha

Wall Street was hit hard on Dec 2 by fresh trade tensions and downbeat U.S. manufacturing data. Each of the key U.S. indexes — The S&P 500, the Dow Jones and the Nasdaq — suffered their steepest single-day drop since mid-October. Overvaluation concerns probably played a role in dragging down the indexes.

SPDR S&P 500 ETF SPY, SPDR Dow Jones Industrial Average ETF DIA and Invesco QQQ Trust QQQ lost about 0.8%, 0.9% and 1.02%, respectively, on the day.

“President Donald Trump’s announcement that he would reimpose tariffs on Brazilian and Argentinian steel and aluminum” and possibilities of China intensifying retaliation over a supportive U.S. bill toward pro-democracy Hong Kong protestors flared up geopolitical tensions.

On top of it, the ISM manufacturing purchasing managers’ index came in at 48.1 for November, down from 48.3 in October and falling short of consensus economists’ expectation of 49.2, according to Bloomberg data. This marked the fourth successive month of ISM data below 50, reflecting a contraction in activity.

Also, U.S. construction spending declined 0.8% in October against expectation of a 0.4% increase.  Spending on private, residential and public construction projects declined for the month, leading to more than a 1.8% slump inReal Estate Select Sector SPDR Fund (XLRE) on Dec 2.

How to Profit

Given the upheaval, investors might want to go short on Wall Street as well as global equities, at least for the time being. Below we highlight a few of inverse ETFs.

Dow Jones

Investors intending to play against the tumbling Dow Jones, may tap ProShares Short Dow 30 DOG (up 1% on Dec 2), ProShares UltraShort Dow30 DXD (up 2%) and ProShares UltraPro Short Dow30 SDOW (up 2.9%).

China

China-related inverse play could be Direxion Daily CSI 300 China A Share Bear 1X Shares CHAD( up 0.5% on Dec 2).

S&P 500

Investors can go against the S&P 500 with ProShares Short S&P500 ETF SH) (up 0.9%) and Direxion Daily S&P 500 Bear 1X Shares SPDN (up 0.8%).

Technology

Technology stocks were hit hard on Monday. Thus, inverse ETF ProShares UltraShort Technology (REW) jumped about 2.8% on Dec 2.

Nasdaq

ProShares Short QQQ PSQ (up 1.1%), ProShares UltraShort QQQ QID(up 2.2%) and ProShares UltraPro Short QQQ SQQQ (up 3.3%) are good to play against the Nasdaq.

Small-Cap

One can short small-cap U.S. equities with ProShares Short Russell2000 (RWM) (up 1%).

EAFE

ProShares Short MSCI EAFE EFZ (up 0.6%) could be a good way to short stocks from the EAFE region and avoid the spillover effect of the global trade fear.

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SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
Proshares Short QQQ (PSQ): ETF Research Reports
 
ProShares Short MSCI EAFE (EFZ): ETF Research Reports
 
ProShares UltraPro Short QQQ (SQQQ): ETF Research Reports
 
Direxion Daily S&P 500 Bear 1X Shares (SPDN): ETF Research Reports
 
ProShares Short S&P500 (SH): ETF Research Reports
 
Proshares Short Dow30 (DOG): ETF Research Reports
 
ProShares UltraPro Short Dow30 (SDOW): ETF Research Reports
 
Invesco QQQ (QQQ): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
ProShares UltraShort QQQ (QID): ETF Research Reports
 
ProShares UltraShort Technology (REW): ETF Research Reports
 
Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD): ETF Research Reports
 
ProShares UltraShort Dow30 (DXD): ETF Research Reports
 
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