How To Profit From Wall Street Crash With ETFs

Probably nothing went right on Nov 20 with tech stocks tanking, each of the FAANG stocks slipping into bear market, global growth worries coming at the forefront, oil prices taking a dive and sharp selloffs in cryptocurrency market (read: Are We Headed Toward Bear Market? ETFs to Save Your Portfolio).

Rising rate concerns in the United States and no concrete signs of abatement in U.S.-Sino trade tensions and its impact on global growth are the main culprits. While both the factors dealt a blow to the overall market, high-flying tech names — known for lofty valuations — specifically took a hit.

Notably, some of FAANGs have come up with downbeat earnings and production report of late. Facebook (NASDAQ:FB) , Amazon (NASDAQ:AMZN) , Apple (NASDAQ:AAPL) , Netflix (NASDAQ:NFLX) and Google-parent Alphabet (NASDAQ:GOOGL) have steadily declined over the last six weeks. Tech stocks started to lose luster starting October when the tech-heavy Nasdaq Composite index lost 9.2%, marking its steepest monthly decline since November 2008.

Coming to the oil patch, United States Oil (NYSE:USO) USO lost about 7.2% on Nov 20. The fund is down 23% past month on concerns of rising output given softer-than-expected U.S. sanctions on Iran and waning demand amid weaker global growth forecast (read: Brent in Bear Market: 4 Country ETFs to be Cautious About).

Notably, the International Monetary Fund (IMF) lowered its global growth forecasts on concerns between the United States and its trading partners. The IMF now expects the global economy to expand 3.7% this year and next year — down 0.2 percentage points from the previous forecast.

Bitcoin prices have also been falling sharply with Bitcoin USD (BTC-USD) plummeting about 69% this year. Most recently, it slid to $4,279, marking the lowest in the last 13 months. In late-2017, the cryptocurrency had scaled to as high as $19,870.62.

Market Impact

The result of these negative developments is a bloodbath in the markets. The three big U.S. ETFs SPDR S&P 500 ETF (NYSE:SPY) SPY (down 1.8% on Nov 20), SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (V:DIA) (down 2.1%) and Invesco QQQ Trust QQQ (down 1.8%) lost massively. The S&P 500 (down about 1.2%) and the Dow Jones (down 3.3%) are now in the red for the year while Nasdaq Composite is up just 0.1%.

How to Profit?

Given the upheaval, investors could easily tap the opportunity by going short on global equities, at least for the near term. Below we highlight a few.

Dow Jones

Investors looking to play against the tumbling Dow Jones may tap ProShares Short Dow 30 DOG (up 2.2% on Nov 20), ProShares UltraShort Dow30 DXD (up 4.5%) and ProShares UltraPro Short Dow30 SDOW (up about 6.6%).

S&P 500

Investors can go against the S&P 500 with ProShares Short S&P500 ETF SH (up 1.9% on Nov 20) and Direxion Daily S&P 500 Bear 1X ETF (LON:SPD) (up 1.9%).

Nasdaq

ProShares Short QQQ (AX:PSQ) (up 1.8% on Nov 20), ProShares UltraShort QQQ QID (up 3.6%) and ProShares UltraPro Short QQQ SQQQ (up 5.3%) are good to play against the Nasdaq.

Technology

Technology stocks have taken the biggest blow. So, inverse tech ETFs ProShares UltraShort Technology REW and Direxion Daily Technology Bear 3X ETF TECS (up 6.3%) jumped more than 3.1% on Nov 20.

FANG

Given the mounting pressure on the FANG space, it is no wonder investors are looking to bet against it. MicroSectors FANG+ Index Inverse ETN GNAF is one such option (read: Leveraged FAANG ETFs: What Investors Need to Know).

Small-Cap

One can also short small-cap U.S. equities with ProShares Short Russell2000 RWM (up about 1.9% on Nov 20).

EAFE

ProShares Short MSCI EAFE EFZ (up 1.7% on Nov 20) could be a good way to short stocks from the EAFE region and avoid the spillover effect of the Wall Street sell-off.

Emerging Markets

If anybody wants to short emerging markets, ProShares Short MSCI Emerging Markets EUM (up 2% on Nov 20) would be their choice (read: ETFs to Benefit & Lose From a Strengthening Dollar).

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