Three Top Trades to Consider as Markets Drop

The pullback could get worse.

Right now, the Dow Jones is sitting at double bottom support dating back to early February 2022. The index is also wildly oversold on RSI, MACD, and Williams’ %R, as traders panic over recession, Fed, and inflation fears.

From here, if the Dow fails to hold support, the next line of potential support is 29,000. And should that fail to hold, we could see Dow 27,000.

But as we’ll remind you many times, don’t panic. Markets have been through worse. And they’ve bounced back every time. While you can always buy recession resistant trades, like Costco, Walmart, and Procter & Gamble, and you can trade volatility ETFs like the UVXY, you may also want to consider short ETFs.

Look at the ProShares Short S&P 500 (SH), for example.

As markets have fallen apart, SH ran from a low of about $15 to $17.06 in recent days. While that’s not a huge gain, a gain is a gain. SH has an expense ratio of 0.88%, and is exposed to stocks, such as Apple, Microsoft, Amazon.com, S&P 500 Index swaps, and U.S. Treasury bills.

Or, take a look at the ProShares UltraPro Short QQQ ETF (SQQQ).

Over the last few days, the SQQQ ran from about $45 to $66.63, and could see higher highs, as markets break down. The SQQQ has an expense ratio of 0.95%, with holdings in NASDAQ 100 Index swaps and U.S. Treasury bills.

There’s also the Direxion Daily S&P 500 Bear 3X Shares ETF (SPXS).

The SPXS ran from a recent low of $21 to $29.82, and could also run higher, as markets tumble. With an expense ratio of 1.01%, the ETF “offers 3x daily short leverage to the broad-based S&P 500 Index, making it a powerful tool for investors with a bearish short-term outlook for U.S. large cap stocks,” as noted by ETFDB.com.