Note, the model did not switch to neutral before moving to a sell because there were still enough indications yesterday that this could just be a minor pullback. The action of yesterday's leaders made the model nearly switch to neutral but there were enough leaders that were still showing constructive pullbacks even though the group as a whole fell more than the leading indices, but keep in mind that leaders generally are more volatile than the major averages.
Here are a few suggestions of inverse ETFs we believe will outperform in the current sell signal environment given the situation in China triggering a short to intermediate term top in commodities as well as the situation in Ireland:
1-times
SH (inverse S&P 500 - this index contains commodities-related stocks)
FXP (inverse China - play on potential rate hike)
2-times
EPV (inverse Europe - play on sovereign debt problems)
BZQ (inverse Brazil - play on commodities short to intermediate term top)
AGQ (inverse silver though has already come off hard off the top)
DGP (inverse gold)
3-times
SPXU (inverse S&P 500)
Keep in mind that, with the exception of May 2010, these pullbacks since March 2009 have been short lived, so given precedent, we would not be surprised to see the market find its footing soon, and resume its uptrend. QE2 is alive and well. That said, our opinions do not matter. Price/volume action of the major indices and leading stocks rule the day.
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