SPDN: An Inexpensive Way To Profit When The S&P 500 Falls

Summary
SPDN is not the largest or oldest way to short the S&P 500, but it’s a solid choice.
This ETF uses a variety of financial instruments to target a return opposite that of the S&P 500 Index.
SPDN’s 0.49% Expense Ratio is nearly half that of the larger, longer-tenured -1x Inverse S&P 500 ETF.
Details aside, the potential continuation of the equity bear market makes single-inverse ETFs an investment segment investor should be familiar with.
We rate SPDN a Strong Buy because we believe the risks of a continued bear market greatly outweigh the possibility of a quick return to a bull market.
Put a gear stick into R position, (Reverse).
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By Rob Isbitts

Summary
The S&P 500 is in a bear market, and we don’t see a quick-fix. Many investors assume the only way to navigate a potentially long-term bear market is to hide in cash, day-trade or “just hang in there” while the bear takes their retirement nest egg.

The Direxion Daily S&P 500® Bear 1X ETF (NYSEARCA:SPDN) is one of a class of single-inverse ETFs that allow investors to profit from down moves in the stock market.

SPDN is an unleveraged, liquid, low-cost way to either try to hedge an equity portfolio, profit from a decline in the S&P 500, or both. We rate it a Strong Buy, given our concern about the intermediate-term outlook for the global equity market.

Strategy
SPDN keeps it simple. If the S&P 500 goes up by X%, it should go down by X%. The opposite is also expected.

Proprietary ETF Grades
Offense/Defense: Defense

Segment: Inverse Equity

Sub-Segment: Inverse S&P 500

Correlation (vs. S&P 500): Very High (inverse)

Expected Volatility (vs. S&P 500): Similar (but opposite)

Holding Analysis
SPDN does not rely on shorting individual stocks in the S&P 500. Instead, the managers typically use a combination of futures, swaps and other derivative instruments to create a portfolio that consistently aims to deliver the opposite of what the S&P 500 does.

Strengths
SPDN is a fairly “no-frills” way to do what many investors probably wished they could do during the first 9 months of 2022 and in past bear markets: find something that goes up when the “market” goes down. After all, bonds are not the answer they used to be, commodities like gold have, shall we say, lost their luster. And moving to cash creates the issue of making two correct timing decisions, when to get in and when to get out. SPDN and its single-inverse ETF brethren offer a liquid tool to use in a variety of ways, depending on what a particular investor wants to achieve.

Weaknesses
The weakness of any inverse ETF is that it does the opposite of what the market does, when the market goes up. So, even in bear markets when the broader market trend is down, sharp bear market rallies (or any rallies for that matter) in the S&P 500 will cause SPDN to drop as much as the market goes up.

Opportunities
While inverse ETFs have a reputation in some circles as nothing more than day-trading vehicles, our own experience with them is, pardon the pun, exactly the opposite! We encourage investors to try to better-understand single inverse ETFs like SPDN. While traders tend to gravitate to leveraged inverse ETFs (which actually are day-trading tools), we believe that in an extended bear market, SPDN and its ilk could be a game-saver for many portfolios.

Threats
SPDN and most other single inverse ETFs are vulnerable to a sustained rise in the price of the index it aims to deliver the inverse of. But that threat of loss in a rising market means that when an investor considers SPDN, they should also have a game plan for how and when they will deploy this unique portfolio weapon.

Proprietary Technical Ratings
Short-Term Rating (next 3 months): Strong Buy

Long-Term Rating (next 12 months): Buy

Conclusions
ETF Quality Opinion
SPDN does what it aims to do, and has done so for over 6 years now. For a while, it was largely-ignored, given the existence of a similar ETF that has been around much longer. But the more tenured SPDN has become, the more attractive it looks as an alternative.

ETF Investment Opinion

SPDN is rated Strong Buy because the S&P 500 continues to look as vulnerable to further decline. And, while the market bottomed in mid-June, rallied, then waffled since that time, our proprietary macro market indicators all point to much greater risk of a major decline from this level than a fast return to bull market glory. Thus, SPDN is at best a way to exploit and attack the bear, and at worst a hedge on an otherwise equity-laden portfolio.

S&P 500 Rallies As U.S. Dollar Pulls Back Towards Weekly Lows

Key Insights
The strong pullback in the U.S. dollar provided significant support to stocks.
Treasury yields have pulled back after touching new highs, which served as an additional positive catalyst for S&P 500.
A move above 3730 will push S&P 500 towards the resistance level at 3760.
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Pfizer Rallies After Announcing A Huge Price Hike For Its COVID-19 Vaccines
S&P 500 is currently trying to settle above 3730 as traders’ appetite for risk is growing. The U.S. dollar has recently gained strong downside momentum as the BoJ intervened to stop the rally in USD/JPY. Weaker U.S. dollar is bullish for stocks as it increases profits of multinational companies and makes U.S. equities cheaper for foreign investors.

The leading oil services company Schlumberger is up by 9% after beating analyst estimates on both earnings and revenue. Schlumberger’s peers Baker Hughes and Halliburton have also enjoyed strong support today.

Vaccine makers Pfizer and Moderna gained strong upside momentum after Pfizer announced that it will raise the price of its coronavirus vaccine to $110 – $130 per shot.

Biggest losers today include Verizon and Twitter. Verizon is down by 5% despite beating analyst estimates on both earnings and revenue. Subscriber numbers missed estimates, and traders pushed the stock to multi-year lows.

Twitter stock moved towards the $50 level as the U.S. may conduct a security review of Musk’s purchase of the company.

From a big picture point of view, today’s rebound is broad, and most market segments are moving higher. Treasury yields have started to move lower after testing new highs, providing additional support to S&P 500. It looks that some traders are ready to bet that Fed will be less hawkish than previously expected.

S&P 500 Tests Resistance At 3730

S&P 500 has recently managed to get above the 20 EMA and is trying to settle above the resistance at 3730. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

If S&P 500 manages to settle above 3730, it will head towards the next resistance level at 3760. A successful test of this level will push S&P 500 towards the next resistance at October highs at 3805. The 50 EMA is located in the nearby, so S&P 500 will likely face strong resistance above the 3800 level.

On the support side, the previous resistance at 3700 will likely serve as the first support level for S&P 500. In case S&P 500 declines below this level, it will move towards the next support level at 3675. A move below 3675 will push S&P 500 towards the support at 3640.

A Levels Online in an ever-changing world!

Many of you often ask us if A Levels online are worth considering in order to gain a recognized qualification or if you have left it too late to study A Levels, as part of your career progression.

Suggested article: A Level Courses Online

A Levels, known as ‘Advanced Level qualifications’ are normally introduced for students aged 16 and above. The term of the A Level qualification would normally be two years, although learners choosing to study through online learning, can normally fast track and complete this much sooner. UCAS points will be available, which will go towards University applications.

Learners also have the option to complete AS Level only and will still receive UCAS points, depending on grades achieved.

Do I need A Levels for University?

Most universities insist that potential applicants have a good mix of basic Maths and English Level 2, together with Level 3 qualifications or A Levels in order to secure a place with them. When considering applying to University, the first thing we recommend you should do is contact them and ask what the entry requirements are for the specific degree you are considering studying as you cannot leave this to chance. We have had students come to us at the eleventh hour, desperate to study a specific subject in a short space of time because they did not ask this simple question.

Can A Levels go wrong?

In an ideal world, many would complete their A Levels in sixth form at a conventional school or college, then progress to college or university. However, this does not always go according to plan and for one reason or another, you may not have had the opportunity to gain your A Level in a school or college setting.

A classic example is a Covid-19 pandemic, where many students were expected to sit their exams in the normal way and were then told that due to the cancellation of exams, their results would be based on predicted grades. This worked for some learners as they had worked hard on any assessments submitted to their Teacher but for others who hadn’t really made the effort, relying on studying hard for their examinations; it did not bring the desired effect with low grades submitted.

We then had a second year of canceled examinations, again something that no one was prepared for. The results of this, we are still awaiting, but I am sure that there will be learners receiving grades they were not expecting.

There have also been other reasons learners have been unable to achieve their A Level qualification. As an example, we were approached by Jason, who had been keen to study A Level Computer Science at school but during his first year, he had become extremely ill and was not able to complete his second year. This is one of our extremely popular courses as this can lead to various career paths such as Application Analyst, Business analyst, Data analyst, Games developer, etc. We enabled Jason to complete his second year of A Level Computer Science and he then went on to study a degree at university managing to get himself back on track.

Suggested article: A Level Computer Science Online Course

Are there any age restrictions for studying A Levels?

Not everyone is suited to studying with an online learning college though and we have found that learners of all ages enrol with us, as there appears to be no set criteria for applicants. As they say ‘it is never too late to learn and everything changes so fast, we have to keep up to date with it.

Suggested site: Learn Now Distance Learning College

One of the things we have found with learners is that you really need to be self-motivated and able to work autonomously. This is difficult if you feel you can only work in groups with your peers and do not feel you can set yourself a timetable and stick to it, thus avoiding distractions. We have found that using your Lesson Plan helps considerably as this sets out which modules should be completed and when. This can give you a certain amount of structure and ensure that you stay on track throughout your course.

It would seem that there are always options to complete your A Levels, whether online or studying at a school or college. It is a case of you deciding the best options for yourself.