9. Sell the S&P 500 and Buy the Nasdaq Composite
The graph below shows that the Nasdaq has consistently outperformed the S&P 500 over the past six months.
So why would it be a contrarian move the short the S&P 500 and buy the Nasdaq? Isn't that just following the trend? The chart below shows why it could be considered contrarian. For the past month, the S&P 500 has outperformed the Nasdaq. Unless you think that will continue, you could bet on a reversal to the form of the last six months. This is contrarian with respect to the 30-day record but trend-following for the past six months.
Why would one put on such a trade? If you have high uncertainty about how the market will move but expect that one index is likely to outperform the other, you can try to profit from that difference while otherwise staying market-neutral.You can use the following ETFs to short the S&P 500: the Short S&P 500 ProShares (SH) and the UltraShort S&P 500 ProShares (SDS). The PowerShares QQQ (QQQQ) ETF is long the Nasdaq, and the Ultra QQQ ProShares (QLD) is ultra long (2X). The companion ETFs are S&P Depositary Receipts (SPY) (long the S&P 500) and Ultra S&P 500 ProShares (SSO) (ultra long), and for shorting the Nasdaq, you can use Short QQQ ProShares (PSQ) and UltraShort QQQ ProShares (QID) (ultra short).
10. Tie: Buy Treasuries and Sell Treasuriesa. The case for buying Treasuries: There is an old saying: "Don't fight the Fed." And the Fed has aggressive plans to support the price of U.S. Treasury securities in 2009.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV