MARKET INSURANCE: Direxion Daily S&P 500 Bear 3x ETF (SPXS)

SOURCE:[Growth Stock Investor] – Editors Comments: Not to be an alarmist, but Dow Theory and Elliott Wave Analysis suggests that the Dow Jones Industrial Average has the potential to retest to the 2009 low, which suggests that the DOW, now at a near all-time record at 14,000, could retest the 6,500 area. We are talking “supercycle” stuff here, and timing could be tough to call accurately, but the danger is high enough to suggest we put some insurance on. We want to keep our exposure to the metals and resource sector, but the “big markets” are a very different animal, and reflect a disconnect between sentiment and reality in the US.

We initiated a long position in SPXS on Monday morning. This is a short term instrument for those with the highest appetite for risk, besides investors who are willing to short stocks. The SPXS can be considered for heavily leveraged bearish exposure. Basically it reflects 300% of the inverse of the price performance of the S&P Index, and is very liquid. Of note, this is a call on what we see as a major technical top on the US markets. In times of market sell-offs, the SPXS will deliver outsized returns. Thus, this fund should be considered by those who seek to profit from panic that could result from a fast sell-off that jolts the market.

For those questioning this “call” we provide some bullet points which explain our instincts…

• Sentiment: extreme optimism
• Complacency: Highest since 2007
• Exposure: Record stock exposure
• Cash: Record low in mutual funds
• Margin debt: 5-year high
• Mutual fund in-flow:
• Record high Technicals: 3 major tops

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MARKET INSURANCE: Direxion Daily S&P 500 Bear 3x ETF (SPXS)