A Beating in the Offing & Adding Two Shorts

Just take a look at this headline found on Market Watch:

Dow Jones Industrial Average futures down nearly 500 points

Looks like Tuesday is going to be awesome when the market opens back up. Foreign stocks are taking a beating rubbing their hands together worrying about a US economic slow down. And I guess that they should be worried. The market looks lost and there just aren't enough breadcrumbs to find our way home.

Northern Rock looks like it finally has a plan to get out from it's pickle. Want to see what would have happened if Countrywide hadn't been thrown a lifeline by Bank of America? Here it is. But I think it would have been even worse due to the size of the servicing portfolio Countrywide holds. And if you don't think our government wasn't propping CFC up you're nuts. Want to guess who was one of the biggest window tappers and money bidders in the last few months...that is right, Countrywide.

With so much sunshine these days it is hard to find really good companies that you look at and say, "I want to buy this today." Everything is going down. It is fairly orderly and consistent. At least it's that.

But I am tired of seeing red numbers in my pretend portfolio. I don't think there is anyone that likes red numbers, except those who profit when the numbers go red. That's right, shorting.

Now shorting individual stocks is well, something that should really be left to those who know just what the heck they are doing. It is not for the faint of heart. The gains can be glorious. The losses can be devastating.

So, I'm not going to short individual stocks. I am going with two EFT's that I mentioned previously, DOG & SDS.

Short Dow30 Proshares (DOG) Want to talk about risk? Here is a pick for you. This is a new EFT that has a very small market cap (126 Million) and volume runs about 500,000. Compare that to QQQQ with market cap of 20 billion and a volume that runs 273 million. What that means is that it is hard to determine what the real value of DOG is. When you go to sell this position (when the market stops heading south) you might have trouble finding a buyer at a price that you want. DOG has been doing well recently, of course, up over 8% since the start of the year and 15% from the October lows. I foresee this being in my portfolio anywhere for the next 6-12 months.

UltraShort S&P500 Proshares (SDS) This EFT reacts to twice the performance of the S&P. As you can imagine, it has been doing quite well lately. And I also fully believe that the turmoil in the financial markets is not nearly over. The S&P is roughly 20% financial companies. Believing that the market will continue to head lower and that financials will lead the way down as they have, SDS is a perfect pick for me. Let's see how it performs. Since the start of the year this EFT is up over 22% and over 35% since October. Again, I'm seeing a 6-12 month timeframe.

Both of these EFT's will require close watching for any sign that the market is going to turn. These are not the buy and let set type of purchases.