Bullish & Bearish Opportunities Arising in Emerging Markets

Emerging markets can offer traders the ability to play off strength outside U.S. borders. With leveraged ETFs, there are both bullish and bearish opportunities to ponder.

Because the strength of EM can often be tied to their local currency, upside will hinge on what the greenback does. Right now, the prospect of rate cuts bodes well for EM currencies. But a sudden pivot could call for a reversal.

"Emerging-market stocks declined and currencies trimmed gains as hawkish remarks from Federal Reserve officials and stronger-than-expected US consumer confidence hurt risk appetite," reported Bloomberg.

Of course, a stronger dollar from a higher-for-longer interest rate environment could hurt EM equities in the interim. That said, consider using the Direxion Daily MSCI Emerging Markets Bear 3X ETF (EDZ) as a hedge. The fund seeks daily investment results equal to 300% of the inverse of the daily performance of the MSCI Emerging Markets Index.