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).
Birdlkportfolio

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.

Marketing Your E-commerce Business Through Social Media Networks

The goal with social network marketing is twofold:1. You are trying to enhance your site’s community by establishing outposts on social networking sites so people who share your interests, or are interested in your products and services, find you and your site.2. Getting involved in social networking multiplies the number of places that your site and your products can be found by search engines, which is critically important to the success of your e-commerce business.How To Leverage Social Media Networks To Our Advantage?Simply, we are trying to spread the word about your e-commerce business. You can take your product reviews or blog posts and spread them as far as possible online enlisting the help of these sites. It’s important to make sure the content you’re promoting is interesting and helpful to the audience you’re trying to reach. Remember, people like to do business with their friends if they’ve never met you offline. By being reasonable and participating in social networking, you’ll expand your credibility and potential customer base in many important and helpful ways.It’s also important to recognize that these social media outlets were designed to serve as conversation platforms, and not as overt marketing channels. Sending messages that are overly promotional or commercial is often compared to shouting at a party where everyone else is chatting quietly, and the backlash can overwhelm the benefits of participation. As an ecommerce business owner I recommend taking a couple of weeks to monitor the various sites to get a sense of the patterns and informal rules before posting anything.Which Sites Do You Need To Target?Here’s a brief overview of the important sites you need to target:Digg.com: Digg is a popular social news website in which community members vote articles up and down, with the most popular articles appearing on the front page. Users submit articles on topics including technology, world & business, science, gaming, lifestyle, entertainment, sports and offbeat. Having an article reach the home page can generate a tremendous amount of traffic to your e-commerce venture very quickly, but a Digg link can be helpful even if you don’t make the front page. Your link will be archived and available to search engines, as well as being available to users who search within the Digg archives directly.Twitter.com: Twitter is generating a ton of online buzz, and for good reason. The short messaging service is evolving into a communication and news platform that e-commerce ventures can’t afford to ignore anymore. Twitter allows users to exchange short messages that are limited to 140 characters, which is roughly about 25 words or so. Many sites have found good success posting (“tweeting,” in Twitter lingo) short summaries of new blog posts or product reviews, highlighting interesting articles or trends in their area of expertise, or just reaching out and seeing who might be interested in the same things they are.Twitter’s ‘hashtag’ (#) function, for instance, makes it very easy for users to search on specific events or topics other users have marked with hashtag function. Many attendees at popular conferences, for instance, use hashtag searches to find and meet each other. Check Twitter’s search page (search.twitter.com) to see popular topics generating user interest.Facebook.com: Facebook has long been popular with college-aged students, but since it opened its doors to a general audience, the site has been growing rapidly, with most new users coming from an adult audience that’s over 30. To reach this growing audience, e-commerce venture owners can create positive marketing relationships on Facebook in two ways. The first and most obvious way is to invite customers to “friend” you on the site. You may not want customers to share the same details or photos you’re sharing with friends and family members, but you can create limited profiles that allow people to get a bit of a behind-the-scenes look into your business without revealing too many personal details.In addition, while Facebook is best known for its personal “profiles,” it does let organizations create pages that allow Facebook members to become fans of your e-commerce venture. While they may be more likely to become fans of a football team or a Bollywood star, Facebook fan pages give your venture another opportunity to highlight interesting content related to your business and, almost more importantly, provide search engines with another place to discover content about, and related to, your e-commerce venture and your market niche.If you do not have a personal Facebook account, you can create a specific account for your business. According to Facebook, a business account can add information, photos or videos just as a personal account can, but can’t see information about visitors and can’t explore other areas of Facebook, so this might not be the best option for your e-commerce venture.MySpace.com: Similarly, MySpace is a popular site especially with younger consumers, that’s becoming an important marketing tool for e-commerce businesses (and a critical outlet for bands to reach their audience). As with Facebook, you can reach this growing audience by forming relationships with customers and other people. In addition to setting up a profile, MySpace lets users join and create groups that attract people who share your interests or hobbies. If you’re trying to sell guitar accessories online, joining groups that serve guitar players would give you great insights into their interests and equipment needs, and allows you to share content and create relationships with other members of the guitar-playing community.Does Social Media Networks Really Help?If you want your e-commerce business to stand out amongst the crowd it’s becoming necessary to have these tools on your website. Your business will not survive over the long term if you are not connected with the audiences within these networks. Furthermore you can achieve great success simply by offering something of value and your e-commerce business can go viral very quickly.Take the time to understand how these social media outlets fit into your e-commerce business and over time you will start to see the benefits.
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