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10 Contrarian Ideas for the Summer

The Vanguard Health Care ETF (VHT), the Health Care Select Sector SPDR (XLV), the PowerShares FTSE Rafi Health Care (PRFH), the First Trust Health Care AlphaDex (FXH) and Rydex S&P Equal Weight Health Care (RYH) are all broad-based health care ETFs. There are many subsector ETFs, and there is even a leveraged short health care sector ETF, the Ultra Health Care ProShares (RXL).

7. Sell Real Estate

New housing construction starts are still contracting, inventories of houses on the market are still much higher than normal, foreclosures are continuing at a high rate, and a new bubble of adjustable-rate mortgage resets are scheduled, which may add to mortgage defaults. There may still be fallout in commercial real estate through the rest of 2009 and beyond. Investors have been trying to look through the valley to a sector recovery starting by the end of the year. If there is realization this summer that a recovery might be much further off, this beaten-down sector could fall further, even exceeding the lows of March.

The rally from the early March bottom has seen the Ultra Real Estate ProShares (URE) gain 69% (including dividend), but this rally may be failing at resistance shown (defined by November closing lows). The failure of the rally would be confirmed if MACD starts to reverse its current uptrend.

URE
Stockcharts.com

To short real estate, the Ultra Short Real Estate ProShares (SRS) can be used. The companion leveraged long ETF is the Ultra Real Estate ProShares (URE).

One note of caution here: SRS and URE generally should be used for short-term trading positions only. As with many leveraged ETFs, the attempts to provide daily tracking of indices leads to small tracking errors (many more negative than positive). Over time, these many small errors accumulate to produce major distortions.

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