ETFs to Short if You’re a Stock-Market Bull

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June 5, 2009 10:43am ETF BASIC NEWS

The worst-performing exchange traded funds in May, which largely bet against commodities, might be good investments for short sellers who are bullish on the stock market.

Of the 25 biggest losers, the first 24 use inverse strategies that cause them to gain value as their underlying index falls. The remaining fund tracks an index that measures bearishness. If the stock market rebounds significantly, a short position in these funds could generate big gains.

Half of these ETF laggards track commodities inversely, specifically metals and energy. The weakening dollar lit a fire under crude prices in May, causing them to soar 30% to $66.31 a barrel. The falling dollar also boosted demand for gold and silver, whose prices rose 10% and 27%, respectively.

The worst-performing ETF, the PowerShares DB Crude Oil Double Short ETN(DTO), sank 54%. Five other energy funds made the list, including the ProShares UltraShort DJ-UBS Crude Oil Fund(SCO Quote), down 41%; the Direxion Daily Energy Bear 3X Shares ETF(ERY), down 34%; and the Rydex Inverse 2X S&P Select Sector Energy ETF(REC), down 26%.

Full Story: http://www.thestreet.com/story/10509510/1/etfs-to-short-if-youre-a-stock-market-bull.html

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