Market Overview

A Consumer Cyclical ETF Hitting On All Cylinders

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A Consumer Cyclical ETF Hitting On All Cylinders

A small amount of exchange-traded funds hit record highs on Monday, still an impressive feat considering U.S. markets traded broadly lower. Of that small amount, there was a decent concentration of consumer discretionary funds.

What Happened

The Consumer Discretionary Select Sector Index (IXYTR), one of the most widely followed baskets of consumer cyclical stocks, is up about 24% year-to-date, handily outpacing the S&P 500 along the way.

Enter the Direxion Daily Consumer Discretionary Bull 3X Shares (NYSE: WANT), which is designed to deliver triple the daily returns of that index.

That index “includes domestic companies from the consumer discretionary sector which includes the following industries: media; retail (specialty, multiline, internet & catalog); hotels, restaurants & leisure; textiles, apparel & luxury goods; household durables; automobiles; automobile components; distributors; leisure equipment & products; and diversified consumer services,” according to Direxion.

Why It's Important

While the aforementioned consumer discretionary benchmark is up 24% this year, the triple-leveraged WANT is higher by 22.31% over just the past month. It helps when a leveraged ETF's underlying index allocates 24% of its weight to shares of Amazon.com Inc. (NASDAQ: AMZN), as is the case with WANT's index.

Amazon Prime Day arrives next Monday, meaning there could be a short-term catalyst in the works for the stock and WANT, just the situation leveraged ETFs were created for.

WANT has also been supported by Home Depot Inc. (NYSE: HD) and McDonald's Corp. (NYSE: MCD), the latter of which is one the best-performing members of the Dow Jones Industrial Average this year and has regularly been hitting record highs. Those two stocks combine for nearly 16% of WANT's underlying index.

What's Next

Looking at the charts for stocks like Amazon and McDonald's, it is hard to bet against those names. Traders with the chops to do just that may want to consider WANT's bearish cousin, the Direxion Daily Consumer Discretionary Bear 3X Shares (NYSE: PASS).

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