The SPY Flies Higher After U.S. Inflation Report Renews Hopes Of Rate Cuts

BY Benzinga | ECONOMIC | 05/15/24 11:30 AM EDT

The SPDR S&P 500 reached a new all-time high of $526.80 on Wednesday after the Consumer Price Index (CPI) showed inflation pressures eased in April.

The central bank is widely anticipated to hold rates steady until September when a 25-basis point cut is expected. The April reading, which came in broadly in line with estimates has further reinforced that expectation.

Whether or not the SPY will continue its blue-sky run remains to be seen but the ETF is trading in a strong uptrend, making a series of higher highs and higher lows.

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More experienced traders who wish to play the SPY either bullishly or bearishly may choose to do so through one of two Direxion ETFs. Bullish traders can enter a short-term position in Direxion Daily S&P 500 Bull 3X Shares (SPXL) and bearish traders can trade the inverse ETF, Direxion Daily S&P 500 Bear 3X Shares (SPXS) .

The ETFs: SPXL and SPXS are triple leveraged funds that track the movement of the SPY, seeking a return of 300% or -300% on the return of the benchmark index over a single day.

It should be noted that leveraged ETFs are meant to be used as a trading vehicle as opposed to long-term investments

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The SPXL Chart: SPXL was rising about 2.23% higher Wednesday after gapping up to start the trading session. The ETF has been trading in an uptrend since April 19, when SPXL found a local bottom at the $111.54 mark.

  • The most recent confirmed higher high within the pattern was formed on May 7 at $128.05 and the most recent higher low was printed at the $125.47 mark the following day. On Wednesday, SPXL was working to print a bullish kicker candlestick, which could indicate the ETF will trade higher before finding a local top within the uptrend.
  • Bears may choose to wait until the ETF shows signs that a local top has occurred before entering a trade. Bearish traders can watch for SPXL to eventually form a bearish reversal candlestick, such as a doji or shooting star candlestick, which may take place once the ETF has reached overbought territory.
  • SPXL has resistance above at $135.16 and at $140.27 and support below at $129.07 and at $122.89.screenshot_641.png

Featured image sourced from Shuttertock

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.