By Proshares UltraPro Short SQQQ is the way to go in the bear market
Stock Ticker –
SQQQ ($SQQQ)
Stock Name and Trading Exchange Platform –
Proshares UltraPro Short QQQ ETF – NASADAQ (NASDAQ: $SQQQ)
Sector –
SQQQ is a 3x inverse leveraged ETF that tracks and bets against the Nasdaq-100. This means it shorts the Nasdaq by a multiple of 3.
Proshares UltraPro Short QQQ ETF returns to investors when the markets are down. Say if the Nasdaq-100 falls by 5%, SQQQ conversely soars by 15%.
The Nasdaq-100 is mainly composed of technology and communication stocks, which have done well in the past decade but do not thrive as much in a down market.
Inverse leveraged indices are highly risky and as such, they are only day traded and not held long-term, even by pessimistic investors.
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The index utilizes derivatives and related instruments, the financial weapons of mass destruction that triggered the great subprime recession.
Consequently, it is a delicate market that requires the investing acumen of astute investors.
SQQQ was established in 2010 by Pro shares and is one among many ETFs run by the same issuer.
Recent Most Important News –
The markets have been wild and major indices are still negative for the year. The popular belief among the masses is that we have reached the bottom and it’s time to ‘buy the dip’.
A minor rally was experienced in the past month as some investors buy the fallen stocks. The Nasdaq reported a large outflow in the SQQQ ETF worth $402.4M.
The news could be biased considering the Nasdaq has its interests to boost the index.
However, the exit from SQQQ might be a reality for a few investors who expect a boom soon. The temporary bull run has the attention of greedy investors.
The federal reserve and many other central banks in the world continue to uphold the hawkish stance to fight inflation and interest rates will keep going up as a result.
High-interest rates tend to hurt stocks, and this has contributed to the plunge this year, which has been excellent news for SQQQ holders.
The ETF performance in the past year is better than the last cumulative five years. The only time it surged this much was in March 2020, at the onset of the pandemic.
Tech is experiencing a decline in demand and the top tech firms are revising their previous estimates. The Nasdaq will suffer as a result as US tech stocks are the hottest bubble globally.
Current Position of SQQQ –
SQQQ is in one of its best years yet and this is expected to continue moving forward.
The Nasdaq has fallen greatly but it’s nowhere near its lows and is up by 500% from its peak in 2007. This creates more downside risk for it to fall in these recessionary markets.
Earnings season is here, and strong results have investors pumped up. The Dow Jones closed more than 300 points up following the news.
Netflix which this year become synonymous with crushed stocks seems to have changed its trajectory. It beat earnings expectations and the stock is soaring.
SQQQ is likely seeing a small drop due to trends like this.
The indices are still down over the year. The only rallying markets this year have been the Energy and the US dollar, both of which spell bad news.
Rising energy might benefit corporations but massively hurts the market. The situation in Europe is rather dire and the cost of living is becoming unaffordable.
The US is in a similar situation, only slightly better off with the advantage of having the reserve currency of the world.
The rising dollar has stirred an uproar as individuals and banks around the world rush to hoard the currency, leading to a potential liquidity crisis.
The macroeconomic trends are terrifying, and this could be the biggest catalyst for SQQQ.
With the current economic conditions, the market cannot sustain any meaningful long-term bull run. Understanding these two other markets are key to dissecting, the Bond and Repo markets.
The bond market is primarily the debt / credit market and is way bigger than the stock market, standing at an estimated $119T.
The inversion of the yield curve is a strong signal that has predicted most recessions. Governments are now buying treasury bonds to combat inflation.
The bank of England is continuing to pivot, and panic is setting in. A new phase of quantitative easing is being introduced.
The repo markets are essentially a two-way intersection of cash and securities. The bank is expanding the repo market which could be devastating.
To break it down, governments around the world are opting for printing money aka quantitative easing to bail out the markets.
We were on the verge of hyperinflation and the reversal in trend to quantitative tightening was meant to fix the problem.
The world is in a catch-22, with hyperinflation, food shortages, and geopolitical tensions. The US debt to GDP ratio stands at 120%, which is technically bankrupt at this point.
The US markets as a whole will inevitably crash and this will have a domino effect throughout the world.
Today, a crash in the bank of England affects the whole globe as the world is flat. Technology has interconnected virtually everything, and this house of cards is going down.
Stock markets have historically crashed in a three-phase boom. The rally we are experiencing at the moment is called a bear market rally, which marks the first phase of a crash.
SQQQ is a great play as it shorts the biggest and most overvalued market in the world.
We are now out of the longest bull run in history, everything from equities, housing, and bonds are in a bubble. SQQQ is the best fund to own in the imminent market crash.
SQQQ Stock Price Chart –
SQQQ Stock Price Chart
The ETF is looking up for the year as seen above. It has slightly retraced in the past week and is currently trading at $56.59, down by -2.43% from the previous close.
The Nasdaq 100 has soared in the past week as Netflix and other tech players crushed earnings. This caused SQQQ to fall by -9.99%.
Over the year the SQQQ is one of the few elements that are positively up, gaining as much as +49% in the past six months.
This ETF has crushed it year-to-date rising remarkably by +97% during this time, and this is after the recent pullback.
SQQQ has crushed it in the past month, rising by a solid +18%. It is trading at a day range of $52.87- $58.33. The price is currently at fair value, with huge upsides expected as the bear market sets it.
Sentiment on SQQQ –
Smart investors show very little faith in the current markets. Leaders of the financial sectors like Ray Dalio of Bridgewater’s associates and Jamie Dimon of JP Morgan Chase predict rough times ahead and that we are due for a mega ‘economic hurricane’.
The Nasdaq is tech-centered and many still want to hold on to the sector as it has been one of the best in the past decade.
The times are A-changing as it was famously sung. In every century there is a black swan event that takes place.
Events are unfolding fast from famine, insurrections, war, and energy problems. Tech is an industry that works well in good times and not so much in tough periods.
With the ten-year yield above 4%, we are technically in a recession and contrarian investors see an earthquake ahead.
The sequel to the great depression may be here and just in time for the 100th anniversary of the first one.
Shorting will be the hot new trend in the coming years and SQQQ could be one of the finest ways to capitalize on the market.
Pros of Investing in SQQQ –
- Easy entry – The ETF offers an easy way to take advantage of a market crash without the infinite risk involved by an individual.
- Leverage – It offers great leverage of 3x and thus is a chance to make more profit as compared to the usual shorting.
- Apt timing – We are in the times of a crash and almost back to the 80s. The market is taking a turn for the worst and major investors predict that inverse ETFs will win. 2022 has already reflected this.
- Recession Hedge – SQQQ not only preserves capital in a market downturn by multiplies it as well. Large-cap tech stocks are soaring too high and cannot go further beyond, at which point they would be bigger than the entire economy.
Cons of Investing in SQQQ –
- Indefinite time horizon – Nobody knows when and for how long the market is going to crash. This makes it difficult to predict when the crash begins and the cycle reverses. Only smart investors with an eye for detail can do this.
- Volatility – It is not a long-term hold and is only appropriate for a downturn. With the markets are being manipulated by governments due to an expansion in the money supply, which artificially props up the market.
SQQQ Growth Likelihood and Potential –
While the market has been up in the last decade and historically on an uptrend for the past 50 years, things are about to change.
The last 50 years have seen ridiculous ‘growth’ in the financial markets. There is a great disconnect between the real economy and the financial markets.
While the latter has soared, the former has remained relatively flat, and this disparity is coined ‘The great distortion’ by Former Goldman Sachs manager Nomi Prins.
The world over is in trouble, Europe is in crisis, China has internal issues and predictions of Lehman moment in its banks, and real estate markets are all around.
Truss economics seem not failing with the UK facing a currency collapse, energy crisis, and natural disaster.
Reverting to quantitative easing from the current tightening plan will not solve the problem but further, aggravate the situation.
World governments cannot fight inflation, and even if they tried, they would fail. Inflation is now north of 15% while interest rates have only risen by 6%.
To beat inflation, interest rates would have to exceed the rate of inflation, which would push the world into a depression.
There is no way out and it could get worse if another civil war erupts in North America. China is still eyeing Taiwan but remains apprehensive for the moment.
The SQQQ is tech-heavy and most of the manufacturing and production of essential components happens in Asia.
The BRICS (Brazil, Russia, India, China & South Africa), the alliance will be disruptive to the western economies.
The US as it stands today produces and manufactures very little with most of its operations shipped over to cheaper countries. It is treading on the very thin ground and legendary investors are predicting its collapse.
Market Wizard Larry Benedict predicted that all major indices would be negative for the year 2022, by following this advice and going bullish on SQQQ, one would have made significant gains this year amid the woes.
The last depression took 25 years for the markets to recover. The Japanese stock market is another excellent example of why the notion that ‘it always goes up’ is fallacious.
It is still down today from its highs in the 80s.
The US markets are in the same position, and they should brace for the worst. The depression is a chance to fix the economy by getting rid of the excessive stimulus in the market and rebuilding the real economy.
SQQQ is the opportunity to benefit from the mistake in the market, a classic hedge fund play, by betting against the biggest bubble in human history.
Overall Verdict on SQQQ –
Overly optimistic investors believe that it is risky to bet against the market, although the year has proved otherwise.
The bear market rally has brought back faith to those buying the ‘discounted’ equities hoping they go up. Buy, hold and pray is the worst strategy in the market.
A true capitalistic investor makes money in both bull & bear markets. SQQQ is the way to maximize a down market.
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