Market Overview

This Leveraged ETF Continues Asserting Itself

This Leveraged ETF Continues Asserting Itself

On the back of more harsh rhetoric from the volatile regime in North Korea, one of this year's hottest (and newest) leveraged exchange-traded funds continues surging. Even a modest decline this week, the Direxion Daily Aerospace & Defense Bull 3X Shares (NYSE: DFEN) is still up more over 60 percent since its May 3 inception, and momentum is strong for the only leveraged ETF dedicated to aerospace defense stocks.


DFEN attempts to deliver triple the daily returns of the Dow Jones U.S. Select Aerospace & Defense Index. That benchmark is a cap-weighted collection of some of the most familiar and largest aerospace and defense equities.


“Aerospace companies include manufacturers, assemblers and distributors of aircraft and aircraft parts. Defense companies include producers of components and equipment for the defense industry, such as military aircraft, radar equipment and weapons,” according to Direxion.

Top holdings in the index include Boeing Co (NYSE: BA) (10.14 percent), United Technologies Corporation (NYSE: UTX) (7.87 percent), Lockheed Martin Corporation (NYSE: LMT) (7.37 percent), General Dynamics Corporation (NYSE: GD) (6.4 percent), Raytheon Company (NYSE: RTN) (6.19), and Northrup Grumman Corporation (NYSE: NOC) (6.11


Getting Some Attention


While the technology sector has been grabbing most of the sector-level headlines this year, the industrial group is performing admirably, thanks in large part to the aerospace and defense industry.


For most of the last three years there’s been one consistent driver of the market: tech stocks. While every other sector has faltered at various times, the Technology Select Sector is up about 44 percent over the past three years, due in large part to the rally in large-cap stocks,” said Direxion in a recent note


The industrial sector is up about 16 percent year-to-date, putting it ahead of the S&P 500. As is the case with any leveraged ETF, DFEN is a short-term trade, not a buy-and-hold investment, but it is noteworthy that the fund is up almost 68 percent since launching in the second quarter.


Plenty Of Catalysts


Home to a combined 19 percent weight to Dow components Boeing and UTX, DFEN makes for an ideal tool for short-term traders as aerospace earnings season approaches. North Korea is also a gift that keeps on giving for DFEN traders.


“Fully 46 percent of Republicans — a plurality — said they would support a preemptive strike against North Korea,” reports the Washington Post, citing a Quinnipiac University poll


Some traders are preparing for the Trump Administration to continue talking tough about North Korea. Over the past month, DFEN is averaging daily inflows of over $784,000, according to Direxion data.


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