Market Overview

Time To Talk With Leveraged ETFs


This week, over 15 percent of the S&P 500 stepped into the earnings confessional. Next week, that number increases dramatically as over 40 percent of S&P 500 companies report quarterly results.


The primary reason why the number of earnings reports jumps next week is the onset of technology sector earnings. Technology is the largest sector weight in the S&P 500 and a broad swath of marquee names from the Technology Select Sector Index report results next week. Those earnings reports could spell opportunity with the Direxion Daily Technology Bull 3X Shares (NYSE: TECL) and the Direxion Daily Technology Bear 3X Shares (NYSE: TECS).


TECL attempts to deliver triple the daily returns of the Technology Select Sector Index while TECS tries to deliver triple the daily inverse returns of that benchmark.


What Next Week Brings


The index TECL and TECS track features exposure to computers and peripherals; software; diversified telecommunications services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; wireless telecommunication services; and office electronics.


Seven of the top 10 components in that index report earnings next week, according to Direxion. That group includes Microsoft Corp. (NASDAQ: MSFT) and Facebook Inc. (NASDAQ: FB), which combine for over 18 percent of the Technology Select Sector Index. TECL and TECS can be ideal ways for short-term traders to play post-earnings moves in big-name tech stocks.


“Direxion leveraged and inverse ETFs offer the ability to hedge or potentially capture gains from index movements triggered by these earning reports,” said Direxion.


The View From Traders


Once again, technology is expected to be a major driver of S&P 500 earnings growth in 2018, so perhaps it is not surprising that some risk-tolerant traders are positioning for that theme by embracing the bullish TECL.


Over the past month, TECL is averaging daily inflows of $1.14 million, according to issuer data. Often times when a bullish leveraged sector ETF is adding money, its bearish counterpart is suffering withdrawals, but that is not the case with TECS. The bearish TECS is averaging daily inflows north of $152,000 over the past 30 days.


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Posted-In: Earnings Long Ideas News Sector ETFs Short Ideas Markets Trading Ideas ETFs


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