Sudden Market Pullback Puts Leveraged Bear Funds In Focus

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March 22, 2017 11:55am NYSE:SPXU

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We are seeing what looks like a “Sell The Dip” effect in equity markets in early trading on Wednesday, as the DJIA violated its 20 day SMA throughout the day, and most importantly on the close (by nearly 200 points).


Most media pundits, and it would be hard for us to disagree, are assessing blame on the recent market reversal to weakness on the possible failure to pass Trump’s healthcare bill, for no one wants gridlock in Congress about consequential items. The VIX, having traded with a $10 handle briefly just yesterday, is all of a sudden $12.63 and rising (its 200 day MA is overhead at $13.55).

Trading volume in the markets was heavy yesterday, in a market that has previously been sleepy, range bound and with tepid volume, so the follow up action that we are seeing in early Wednesday trading shows us that as Mark Douglas reminds us in relation to trading, “Anything Can Happen.”

We have had several inquiries in the near term about “Bear” and “Levered” funds, as portfolio managers seem to be eager to hold onto year-to-date and post-Trump election rally gains going into the end of the quarter (the final day of March and end of quarter trading is next Friday, 3/31/2017) .

We are watching the major Large Cap index “Bear” funds very closely (in AUM size order), specifically the following: SDS (ProShares UltraShort S&P 500, Expense Ratio 0.89%, $1.5 billion in AUM), SPXU (ProShares UltraProShort S&P 500, Expense Ratio 0.92%, $709 million in AUM), SQQQ (ProShares UltraPro Short QQQ, Expense Ratio 0.95%, $538 million in AUM), SPXS (Direxion Daily S&P 500 Bear 3X, Expense Ratio 0.95%, $458 million in AUM), QID (ProShares UltraShort QQQ, Expense Ratio 0.95%, $295 million in AUM), DXD (ProShares UltraShort Dow 30, Expense Ratio 0.95%, $240 million in AUM),and SDOW (ProShares UltraPro Short Dow30, Expense Ratio 0.95%, $215 million in AUM).

There are of course countless daily levered “Bear” funds outside of these as well, but these especially will likely catch greater than average interest in the very near term, given the sudden move in equities, and the first “hiccup” in the markets during Trump’s administration afoot.

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The ProShares UltraPro Short S&P500 (NYSE:SPXU) was trading at $17.45 per share on Wednesday morning, down $0.13 (-0.74%). Year-to-date, SPXU has declined -14.50%, versus a 4.86% rise in the benchmark S&P 500 index during the same period.

SPXU currently has an ETF Daily News SMART Grade of F (Strong Sell), and is ranked #30 of 53 ETFs in the Inverse Equities ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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