TMF ETF Faces Uncertainty Amid Bearish Signals and Macroeconomic Factors

Fundamental Analysis

Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) is an Exchange Traded Fund (ETF) that replicates the performance of an index linked to 20+ Year US Treasury Bonds with a 300% long leverage factor.

The ETF is currently trading at $5.80 (as of August 17, 2023) experiencing a drop of 1.36% from the previous close. This price is at the bottom end of the spectrum for the year, with the year's low and high being $5.71 and $12.60 respectively. Currently, TMF has a resistance level at $6.11. It has shown increased trading volume, rising to 42.14 million from an average volume of 25.02 million which could indicate investor interest.

However, it's important to note that there is a negligible market cap, EPS, and PE, which reflects the nature of ETFs as the share values are derived from the net asset values of the funds or the index they track. Therefore, these key ratios which are significantly helpful in evaluating traditional stocks are not applicable here.

The indicators show several mixed signals. The Moving Average Convergence Divergence (MACD), a key indicator, stands at -0.45 for the past three months. When the MACD signals negative, it's generally a bearish signal indicating a potential downtrend.

Also, the relative strength index (RSI), another momentum indicator, currently stands at 25, which is below the common threshold of 30, indicating that the stock is in oversold territory which could spark a short term price reversal.

Further exacerbating these bearish signals, the 50-day moving average of $7.27 and the 200-day moving average of $8.16 are both above the current trading price of $5.80. That indicates an overall bearish trend as the price is trading below these averages.

Recent news indicates fluctuating predictions about TMF's performance. While some reports state that the Federal Reserve effectively pausing rate hikes could lead to a shift to bonds, boosting TMF, others cite a potentially heating economy which could provide hawkishness to the U.S. Federal Reserve, stifling further upside in rising Treasury bills. There is also a worry about high inflation levels which could unfavorably affect bonds.



Considering both the fundamental and technical indicators, TMF faces uncertainty due to macroeconomic factors and its current technical setup. Given an RSI of 25, an uptick for the ETF on August 18, 2023, could occur as it is considered oversold. However, for the upcoming week, expecting a recovery beyond its resistance level would be premature due to the bearish longer-term indicators.

Therefore, TMF may be a Hold for investors already in possession of the stock until there is a clearer trend or reversal of its current bearish indicators. For prospective investors, strategically this could provide a discounted entry point, but caution should be exercised due to significant macroeconomic uncertainties and bearish technical indicators. Hence, this may not be the best time to Buy. A Sell recommendation at this point doesn't necessarily apply to ETFs as they are typically used to hedge other investments, not to sell based on performance.

Check full Direxion Daily 20+ Year Treasury Bull 3X Shares forecast and analysis here.