Market Overview

2 Leveraged ETFs To Trade The January Effect With


Fans of seasonal trading and investing no doubt know about the “January Effect.” This is the notion that stocks will rise in January, therefore setting the course for a bullish new year. 


In recent years, there has been some evidence of the January Effect starting in December. Other, longer-ranging data points suggest the January Effect is more impactful for small-caps than large-caps. In fact, the Russell 2000 Index outperformed the Russell 1000 Index in the first month of the year over the three decades spanning 1972 to 2002.


This presents a potential trading opportunity in the Direxion Daily Small Cap Bull 3X Shares (NYSE: TNA). TNA attempts to deliver triple the daily returns of the Russell 2000 Index.


Leveraged Lessons


By nature, small-caps are volatile, underscoring the point that a leveraged small-cap ETF is bound to be significantly more volatile than a standard small-cap fund.


“Leveraged and inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage,” according to Direxion. “They seek daily goals and should not be expected to track the underlying index over periods longer than one day."


TNA has a bearish cousin. The Direxion Daily Small Cap Bear 3X Shares (NYSE: TZA) attempts to deliver triple the daily inverse returns of the Russell 2000 Index.


January Preparation


Data suggests that traders are already preparing for the January Effect in a big way with TNA while ditching the bearish TZA.


Over the past month, TNA is averaging daily inflows of $3.1 million while TZA is suffering daily outflows $3.5 million, according to issuer data. 


Related Links:


Investors Return To This Staples ETF. 


Loving Leveraged Tech ETFs. 

Posted-In: Long Ideas Broad U.S. Equity ETFs Specialty ETFs Small Cap Analysis Small Cap Markets Trading Ideas ETFs


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