Heading Into The Election, Traders Are Still Betting On Tech
If the first three quarters of 2020 have been any indication, the final three months of the year will more than likely hold its fair share of surprises. That being said, trends among Direxion’s most popular leveraged funds reveal how traders are positioning themselves heading into election season.
Perhaps unsurprisingly, traders have not lost faith in the hottest trade of the year. The Direxion Daily Technology Bull 3X Shares (NYSE: TECL), which attempts to deliver 300% of the daily returns of the S&P Technology Select Sector Index, took in more than $135 million inflows during the first full week of October. That’s more than double the inflows of any other Direxion fund over that span.
This is part of a longer trend for tech. In the last four weeks TECL has taken in over $288 million, more than triple that of any other fund. It’s also worth pointing out that the Direxion Daily Technology Bear 3X Shares (NYSE:TECS), which attempts to deliver -300% of the index, itself experienced $3 million of inflows in the last week and $10 million in the last month, suggesting that some tech bears remain yet.
The continued inflows into tech reflect strong trader confidence that the sector will continue to outperform. And compared to the broader indices, it has. TECL is up 16% in the last four weeks, while the S&P 500 and Russell 2000 are up 4% and 8% respectively.
But TECL has also lagged behind a number of other bullish Direxion Leveraged ETFs in recent weeks. The following bullish leveraged funds have all outperformed TECL by 50% or more in the last month: Direxion Daily S&P Biotech Bull 3x Shares (NYSE:LABU), Direxion Daily Semiconductor Bull 3x Shares (NYSE:SOXL), Direxion Daily Pharmaceutical & Medical Bull 3X Shares (NYSE:PILL), Direxion Daily Small Cap Bull 3X Shares (NYSE:TNA). Even utilities, retail, and Mexico-focused funds have outperformed the broad tech theme.
Tech’s relative weakness compared to other themes is certainly worth noting, especially in light of the continued bullish bets being placed on the sector. The spate of corporate earnings over the next few weeks will provide more insight into whether this near-term bullishness is warranted.
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