React to Market Volatility: Time for inverse leveraged ETFs - TMV, TSLS, SOXS
💰 Tech giants face a market pullback as the 10-year U.S. Treasury yield rises sharply.
📈 Leverage the inverse ETFs: TMV, TSLS, and SOXS, to tackle the tumbling market.
📣 Stay tuned and supercharge purchasing power with CashBoost!
| Market recap
Yesterday, U.S. markets were closed. On Wednesday, January 8th, the S&P 500 $.SPX(.SPX)$ closed higher after a volatile session, while the Nasdaq $.IXIC(.IXIC)$ ended slightly lower. Notable movers included $Meta Platforms, Inc.(META)$ , which fell 1.16%, and $NVIDIA(NVDA)$ , which dipped 0.02%. $NASDAQ Golden Dragon China Index(HXC)$ declined 0.67%.
- Megacaps
NVIDIA saw an intraday reversal, climbing 2.7% before turning lower to finish down 0.02%. Risk-off sentiment weighed on semiconductor stocks, with the $Philadelphia Semiconductor Index(SOX)$ falling 0.96%. $Advanced Micro Devices(AMD)$ dropped 4.31%, while $Taiwan Semiconductor Manufacturing(TSM)$ declined 2.03%.
- Behind the Scenes
Rate cut expectations are dimming as the Federal Reserve's position remains uncertain. The minutes from the Fed's December 2024 meeting, released January 9th, revealed plans to moderate the pace of rate cuts in coming months. Officials cited ongoing inflation risks, concerned that cutting rates too quickly could reignite price pressures.
- Top movers
NVIDIA CEO Jensen Huang's comments cast doubt on quantum computing's near-term potential. His Tuesday statement that practical applications remain decades away pressured NVIDIA's stock on Wednesday. D-Wave's CEO issued a strong rebuttal, and quantum computing stocks rallied in overnight trading: $Quantum Computing Inc.(QUBT)$ added 5%, $D-Wave Quantum Inc.(QBTS)$ rose 3%, and $Rigetti Computing(RGTI)$ gained 6%.
On January 10, drone stocks advanced after hours, with $Unusual Machines Inc(UMAC)$ climbing 6%, $SES AI Corp(SES)$ rising 8%, and $PALLADYNE AI CORP(PDYN)$ gaining 5%.
Also today, Chinese semiconductor stocks saw robust demand. $Cambricon Technologies Corporation Limited(688256)$ , the new tech lord, jumped 9%, touching 777.77 yuan, helping lift $SMIC(00981)$ by over 4%.
| View from the top
The 10-year U.S. Treasury yield, long considered the anchor for global asset pricing, has experienced an unprecedented surge in recent months. On Wednesday, the 10-year U.S. Treasury ( $US10Y(US10Y.BOND)$ ) yield reached 4.73%, while the 20-year U.S. Treasury ( $US20Y(US20Y.BOND)$ ) yield exceeded 5% for the first time. The 10-year yield is projected to surpass 5% during 2025.
Reduced expectations for interest rate cuts are driving this increase. Since December, the Federal Reserve has consistently maintained a hawkish stance. The CME FedWatch tool now indicates less than 5% probability of a January rate cut by the Fed, which has contributed to rising long-term bond yields.
The surge in the 10-year U.S. Treasury yield has significantly dampened U.S. stock market performance. If yields continue climbing, stocks may face additional downward pressure. Moreover, rising Treasury yields are causing bond prices to fall, which could spark a sell-off in the bond market and push yields even higher.
| More on inverse & leveraged ETFs
In the future, the focus of the market is expected to gradually shift from computing power to other AI infrastructure elements (including electricity) and applications.
TMV - Direxion Daily 20+ Year Treasury Bear 3X Shares
$Direxion Daily 20 Year Plus Treasury Bear 3x Shares(TMV)$ is an inverse leveraged ETF that provides 3x inverse returns on U.S. Treasuries with maturities of 20 years or longer. This means when long-term U.S. Treasury prices fall, TMV rises at triple the rate, and vice versa.
The yields on 10-year and 30-year U.S. Treasuries have recently approached multi-year highs, driving strong performance in TMV. The fund showed significant momentum in Q4 2024, breaking through both its 50-day and 200-day moving averages—a signal of strong upward momentum.
TMV may continue to perform well in the short term if high interest rate concerns persist. However, investors should be wary of potential market reversals. As a high-risk, high-reward inverse leveraged ETF, TMV is not meant for long-term holding. The fund can face substantial losses if market sentiment shifts or interest rate trends reverse.
TSLS - Direxion Daily TSLA Bear 1X Shares
$Direxion Daily TSLA Bear 1X Shares(TSLS)$ is an inverse ETF tracking TSLA that provides 1x inverse returns. In other words, when Tesla's stock price falls by 1%, TSLS's price rises by 1%, and when Tesla's stock price rises by 1%, TSLS falls by 1%.
Throughout 2024, Tesla's stock price has shown significant volatility. Following a growth period, market concerns emerged about Tesla's future prospects, driven by intensifying competition in the electric vehicle (EV) industry, raw material price fluctuations, and macroeconomic uncertainties. These growing concerns led to a pullback in Tesla's stock price during 2024, creating upward momentum for TSLS.
This ETF primarily serves as a tool for investors interested in shorting Tesla's stock. Since it doesn't use leverage, it carries relatively lower risk than leveraged products, though some volatility remains inherent in its performance.
SOXS - Direxion Daily Semiconductor Bear 3X Shares
$Direxion Daily Semiconductors Bear 3x Shares(SOXS)$ is a 3x inverse leveraged ETF that provides 3x inverse returns on the performance of the semiconductor sector. Simply put, when the semiconductor sector index drops by 1%, SOXS rises by 3%.
SOXS's performance is closely tied to the ICE Semiconductor Index and its major constituent companies, particularly NVIDIA. If NVIDIA fails to meet market expectations, shows disappointing Blackwell sales, or undergoes price corrections due to macroeconomic pressures, SOXS could deliver significant returns in the short term.
Alternatively, investors can use $Tradr 1.5X Short NVDA Daily ETF(NVDS)$ as a tool to short NVIDIA stock. However, like TMV, SOXS is not suitable for long-term holding.
Stay tuned. Comment, like and subscribe to @Tiger_Contra
Boost purchasing power and trading ideas with CashBoost!
Open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on SG, HK, and US stocks, as well as ETFs. Find out more here.
Other helpful links:
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
