Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

2025 has been a rollercoaster ride for traders. After quickly dropping nearly 20% during the tariff sell-off, the S&P 500® Index* has rapidly rebounded from its April low to fresh all-time highs.

Now, the late summer doldrums loom, a historically weak period for the market. Traders fortunate enough to ride at least some of the recent rebound find themselves at a potential crossroads. For those looking for a short-term hedge on the overall market, Direxion Daily S&P 500 Bear 1X Shares (Ticker: SPDN) is one option to consider. SPDN seeks daily investment results, before fees and expenses, of the inverse performance of the S&P 500® Index.

In particular, SPDN may appeal to traders who are long-term bullish but still worried about a near-term pullback, and who don’t want to trigger potential tax consequences from selling profitable positions.

Indeed, sentiment may be running a bit frothy now that the S&P 500’s powerful rally has pushed it well above its 50-day moving average.*

Below is a daily chart of the S&P 500 Index as of July 22, 2025.

Source: StockCharts.com, July 22, 2025.

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results.

Why the Bears May Have Their Turn Again

Although the overall market has enjoyed a strong run from the April low, there are a few reasons why stocks may have gotten ahead of themselves:

• Markets are Starting to Look Overextended: Some strategists warn that this momentum isn’t underpinned by fresh fundamental catalysts—suggesting we’re due for a pause or pullback. “That rebound has stunned analysts, given the pile-up of macro risks, particularly President Donald Trump’s ongoing threats to impose steep tariffs on key trading partners,” Business Insider reports. “Yet investors keep piling in—even if many are doing so with one eye on the exit.”

• Seasonally Softer Stretch Ahead: Historically, the late summer and early autumn months (August–October) are prone to heightened volatility and occasional drawdowns. That seasonal tendency makes a tactical tool like SPDN potentially useful during this window.

• Fed and Tariff Uncertainty Remain: Strong earnings and positive economic data have propelled markets, but questions linger over the Federal Reserve’s next move. The June Consumer Price Index (CPI)* inflation* report “likely gives the Fed room to continue its wait-and-see approach to cutting rates amid uncertainty over how President Trump’s tariffs will impact inflation,” Yahoo Finance reports. Add the potential for new trade policy shifts, and you’ve got a backdrop ripe for short-term turbulence.

In summary, the S&P 500 is solidly positive on the year, but even the strongest bull markets need to catch their breath. Even traders who think the good times can continue into 2026 may be looking for a hedge sometime during the next few weeks and months.

“Undeniably, the stock market has climbed a steep wall of worry, and investors are right to wonder if the S&P 500 has enough gas in the tank to continue higher,” according to TheStreet.

Using SPDN as a Potential Tactical Hedge

Here are some of the potential benefits of SPDN:

• Inverse Exposure, No Leverage: SPDN seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of the S&P 500. SPDN does not use leverage. It’s not designed as a buy-and-hold strategy.

• Hedge Existing Positions Without Selling: Hedging via SPDN can be potentially useful in taxable accounts—it preserves existing cost bases and sidesteps the complexities of harvesting losses or realizing gains.

• No Margin, No Options: SPDN eliminates the need for margin lines, options strategies or shorting complexities.

SPDN achieves inverse exposure through derivatives like futures and swaps, rebalanced daily to maintain its daily 100% inverse objective. This daily reset is key: SPDN is built for short-term trades and hedges, not long-term holds. Why? Over time, the effects of daily rebalancing and compounding can cause SPDN’s performance to diverge from the S&P 500’s inverse return, especially in volatile or trending markets.

For tactical traders, SPDN offers a straightforward way to express short-term caution—even without upending a longer-term bullish outlook.

*Definitions and Index Descriptions

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.

The S&P 500® Index (SPXT) is designed to be comprised of stocks that are the 500 leading, large-cap U.S. listed issuers. The securities are selected on the basis of market capitalization, financial viability of the company, sector representation, public float, liquidity and price of a company’s shares outstanding. The Index is a float-adjusted, market capitalization-weighted index. One cannot invest directly in an index.

The “S&P 500 Index” is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Rafferty Asset Management, LLC (“Rafferty”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty’s ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.

Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.

Daily Inverse Index Correlation Risk – A number of factors may affect the Fund’s ability to achieve a high degree of inverse correlation with the Index and therefore achieve its daily inverse investment objective. The Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Information Technology Sector Risk — The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs.

Additional risks of the Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, and Passive Investment and Index Performance Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.

ALPS Dsitributors, Inc.