Last week we drew attention to a possible bearish head and shoulders pattern for the NASDAQ Composite. That possibility was promptly erased on Monday when the index set a new high for the year and then moved higher again on Tuesday.

Now the index (and other benchmark indexes also) is showing signs of weakness. The 6-month daily chart is showing signs that the primary upward trend - bounded by the green lines - was broken by the breakthrough of the support line in early November. If so, then a new downward trend - bounded by the red lines is in place.


In that case, we could see consolidation continue until around 2000 - a correction of about 10%.

Of course, charts can't predict the future but investors are now seeking the safety of 3-month treasuries rather than invest in equities. This seems to be in response to increasing pessimism about the rate of recovery, or even its sustainability. Unless some unforseeable event occurs to reverse this pessimistic mood, that 10% correction looks very possible.

No new features this week

With a 10% correction a possibility, it is timely to consider the protection that a short ETF can provide.

When you take a long position, the most you can lose is 100% of your investment if the price goes to zero. When shorting a stock, however, your risk is potentially infinite because there is no limit to the potential price move against you. This, among other factors, makes shorting a very risky game.

Investing in a short ETF, however, allows you to short the market, while limiting your loss in the same way that going long does. That's because the value of the short ETF can never fall below zero. While 'shorting' the market with these ETF's you are in fact taking a long position. A list of short ETF's we track follows. Note that some of these are very thinly traded.

Symbol	Name
DOG	ProShares Short Dow30 ETF
DXD	ProShares UltraShort Dow30 ETF
MYY	ProShares Short MidCap400 ETF
MZZ	ProShares UltraShort MidCap400 ETF
PSQ	ProShares Short QQQ ETF
QID	ProShares UltraShort QQQ ETF
SDS	ProShares UltraShort S&P500 ETF
SH	ProShares Short S&P500 ETF
RWM	SHORT RUSSELL2000 PR
SDD	ULTRASHORT SMALLCAP6
TWM	ULTRASHORT RUSSELL20
DUG	ULTRASHORT OIL & GAS
SIJ	ULTRASHORT INDUSTRIA
SKF	ULTRASHORT FINANCIAL
REW	ULTRASHORT TECHNOLOG
RXD	ULTRASHORT HEALTH CA
SDP	ULTRASHORT UTILITIES
SMN	ULTRASHORT BASIC MAT
SRS	ULTRASHORT REAL ESTA
SSG	ULTRASHORT SEMICONDU
SZK	ULTRASHORT CONSUMER
SHM	SPDR LEHMAN SHORT TE
EFU	PROSHARES ULTRASHORT
EEV	PROSHARES UTLRASHORT
EFZ	PROSHARES SHORT MSCI
EUM	Short MSCI Emerging Markets ProShares
SMB	Market Vectors-Lehman Brothers AMT-Free Short Muni

A complete list of ETF's and their rankings and performance is available in the Industry Analysis area of our site.