Shorting The DOW

I'm not just going to let the DOG out, I'm going to let the double dog out. I'm buying DXD.

DXD – ProShares UltraShort DOW 30

With the death cross remaining, the Dow tried, but failed to penetrate much above 13,000 and it's 200 day moving average in May and has now dropped below important support at 12,000. This might get ugly.

The Death Cross

The Holiday Rally that Wasn't - and Worse.

As recently posted, I took a large position in DIA (Dow Jones Industrial Average Index ETF) on 11-26-07. I sold half of that position on 12-14-07 for a 5% gain and the other half on 1-9-08 for a 3% loss. There was no holiday rally, and it gets worse.

The Dow's 50 day moving average has dropped below its 200 day moving average creating what's known among market technicians as the death cross. The Dow has also dropped below support at 13,000. I think we are in the beginnings of a bear market that may last for 6-9 months or longer.

I use 20% of my retirement portfolio for trading; I like to take advantage of inconsistencies and trends in the market. That portion of my portfolio is in cash and it may stay there for a while. I have not let the DOG (Proshares Short DOW 30) out, but I may.

Proshares UltraShort Oil & Gas ETF

With oil hitting over $92 a barrel as I write this I find myself wanting a way to hedge my energy portfolio from the inevitable pull back, without selling off positions that have taken a lot of time to accumulate. Here's a solution...

DUG - Proshares UltraShort Oil & Gas ETF

Remember "Ultra" means that for every 1% loss in the oil and gas index, DUG will gain 2%, and vice-versa. I have not placed a trade yet, but I'm watching and ready. More on Proshares UltraShort ETFs.

Bear Market Trades

ProShares offers several Exchange Traded Funds that short sell their respective index by a 2:1 ratio.

QID - Proshares UltraShort QQQQ
SDS - Proshares UltraShort S&P 500
DOG - Proshares UltraShort DOW

For every 1% the QQQQ (Nasdaq 100 Trust) loses the QID should gain 2%. I use them as a simple and effective why to hedge my portfolio during extended down drafts and I plan on using them for the next bear market.

I like these funds because they allow me to hold on to the more aggressive positons in my portfolio. I can hedge with one simple buy order instead of selling multiple positions that have often taken quite a bit of time to accumulate. Remember, because of the 2:1 ratio a little goes a long way.