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Buying levels in SH (the inverse S&P500 ETF) have remained high since this bear market began. This is not usually a good sign for the market. But the market has been grinding lower and this fund is up 17.4%.
Many ETFs exist to play defense against a stock market decline, or to try and make money when the bear is in charge. This one has an extensive history and is battle-tested in bear markets.
Shorting equity markets generally has historically been a high-risk proposition, but the risk of significant and protracted downturns is currently very high. Four ETFs, SH, TAIL, DWSH, and BTAL are examined according to three criteria -- performance, risk, and exposure to specific market scenarios.
High purchase levels in SH, plus massive growth in the number of shares outstanding, both point to lower prices for SH - the ProShares ETF short the S&P 500. This conclusion is supported by other investor sentiment indicators that also point to higher prices for the S&P 500 and lower prices for SH.
The Dow Jones Industrial Average fell 640 points on Monday, marking its worst day since June.
Stocks and index ETFs are attempting to pull out of the downdraft that has engulfed much of June, as consumer confidence has fallen off due to climbing inflation and energy prices. Meanwhile, inverse ETFs have seen stellar gains.
Since practically all equity classes drop during a steep market correction, shorting a major index is an investor's best chance at making a profit. A perfect storm of inflation, quantitative tightening, and record global debt indicate the current downturn could be a long one.
Losing out in a down market isn't the “admission fee” for trading; that's why hedging exists. Surprisingly, however, not many investors optimize their portfolios for success when the market is struggling.
The bearish trend is likely to continue, with some analysts expecting bigger drops.
With the S&P 500 inching closer toward a bear market, exchange traded fund investors can still use short or bearish strategies to hedge further downside risks. After dipping more than 2% Monday, the S&P 500 was around 16% below its all-time high from January 3 and 4% short of an official bear market as it [.