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

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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 Quote), 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 Quote), down 34%; and the Rydex Inverse 2X S&P Select Sector Energy ETF(REC Quote), down 26%.

Seven other anti-commodity-based funds were caught betting against the trend including losses of 41% in the ProShares UltraShort Silver Fund(ZSL Quote), 32% in the PowerShares DB Commodity Double Short ETN(DEE Quote) and 20% in the PowerShares DB Gold Double Short ETN(DZZ Quote).

The last fund on the list, the iPath S&P VIX Short-Term Futures ETN(VXX Quote), fell 17% as fewer speculators bet against the S&P 500 Index using put options.

Worst-Performing Exchange Traded Funds in May Fund (Ticker) Rating Objective Total Return YTD Total Return 1 Month PowerShares DB Crude Oil Double Short ETN (DTO) U Commodity -44.60% -53.49% Direxion Daily Financial Bear 3X Shares (FAZ) U Sector Fund-Financial Service -86.83% -43.44% Direxionshares Emerging Markets Bear 3X Shares (EDZ) U Sector Fund-Asset Allocation -79.47% -42.14% ProShares UltraShort Silver (ZSL) U Commodity -58.00% -41.06% ProShares UltraShort DJ-AIG Crude Oil (SCO) U Sector Fund-Undefined Equity -40.08% -40.88% Direxion Daily Developed Markets Bear 3X Shares (DPK) U Sector Fund-Asset Allocation -46.47% -34.15% Direxion Daily Energy Bear 3X Shares (ERY) U Sector Fund-Energy -47.20% -33.54% PowerShares DB Commodity Double Short ETN (DEE) U Commodity -21.87% -32.20% ProShares UltraShort FTSE/Xinhua China 25 (FXP) E- Country Fund-China -61.39% -31.61% Rydex Inverse 2X S&P Select Sector Financial ETF (RFN) U Sector Fund-Undefined Equity -69.37% -30.35% ProShares UltraShort MSCI Emerging Markets (EEV) E- Emerging Market-Equity -60.39% -29.07% ProShares UltraShort Financials (SKF) E- Sector Fund-Financial Service -59.68% -27.15% PowerShares DB Crude Oil Short ETN (SZO) U Commodity -20.19% -26.50% Rydex Inverse 2X S&P Select Sector Energy ETF (REC) U Sector Fund-Energy -36.09% -25.58% ProShares UltraShort MSCI EAFE (EFU) C- International Equity -29.10% -24.43% ProShares UltraShort DJ-AIG Commodity (CMD) U Sector Fund-Undefined Equity -24.73% -23.93% PowerShares DB Agriculture Double Short ETN (AGA) C Commodity -19.11% -23.68% ProShares UltraShort Oil & Gas (DUG) D- Sector Fund-Energy -31.31% -22.77% ProShares UltraShort Basic Materials (SMN) D- Sector Fund-Undefined Equity -54.01% -22.60% WisdomTree Dreyfus Emerging Currency Fund (CEW) U Currency -20.61% -20.61% PowerShares DB Gold Double Short ETN (DZZ) E Commodity -22.40% -19.85% Direxion Daily Large Cap Bear 3X Shares (BGZ) U Growth-Large Cap -38.22% -19.10% ProShares UltraShort MSCI Japan (EWV) D+ Country Fund-Japan -12.15% -19.04% ProShares UltraShort Gold (GLL) U Commodity -27.59% -18.69% Direxion Daily Mid Cap Bear 3x Shares (MWN) U Sector Fund-Undefined Equity N.A. -17.81% Source: Bloomberg & TheStreet.com Ratings Data as of most recent month-end.