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Deep into the darkness peering, long I stood there, wondering, fearing/Doubting, dreaming dreams no mortal ever dared to dream before. --Edgar Allan Poe, The Raven


FMD Capital Management

) -- With the stock market sitting near all-time highs, oftentimes exchange-traded funds that have languished fly under the radar as investors focus on the euphoria of unrealized gains.

The natural inclination is to keep pouring new money into stocks that are performing well, which is exactly what recent data suggests has been happening. So far this year

investors have added

more than $277 billion into stock ETFs and mutual funds. That is the single biggest year of inflows to stock funds since 2000, which suggests that optimism is high despite the risks of a correction.

With Halloween upon us and the end of the year rapidly approaching, I thought it would be prudent to focus in on investment themes that have been persistently frightening all year long. Many of these sectors have been consistently trending downward with no bottom in sight, but when the tide turns they may be ripe for a sharp rebound.

1. What fear?


iPath S&P 500 VIX Short-Term Futures ETN


is designed to provide access to equity market volatility through CBOE Volatility Index futures. Simply put, this exchange-traded note offers investors the ability to capitalize on the CBOE VIX Index which is a widely recognized measure of fear in the marketplace. Throughout 2013 that fear has largely been replace with greed for stocks, which is why VXX has fallen precipitously.

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This ETF is down over 60% year-to-date and most shockingly has attracted over $1 billion in new assets according to

Index Universe

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. Clearly there is still a great deal of demand for institutional investors to hedge their bets using an easy to access ETN such as VXX in their portfolios.

While this fund has fallen out of favor now, it could quickly bounce higher if we see a flight to quality that includes heavy selling pressure from stocks. It can be used as an alternative method of shorting the market in the event that a correction ensues. However, this fund can be volatile and I recommend that novice investors thoroughly research the index methodology before entering a new position and use a

tight stop loss

to guard against further downside risk.

2. Breaking the Buck.


PowerShares US Dollar Bullish Index


is one of the most well-known proxies for tracking the U.S. dollar index. This ETF recently hit fresh 2-year lows as a result of continued strengthening in foreign currencies and a commitment to loose monetary policy by the

Federal Reserve

. A falling greenback can be good for international corporations that derive the majority of their profits from overseas operations. It can also benefit precious metals prices such as gold as investors seek to diversify their exposure away from paper assets.

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There is nothing to suggest that the recent trend of a falling dollar will subside anytime soon. I am continuing to advocate avoiding this space in favor of more traditional asset classes such as stocks and bonds. Although a breakdown in international markets might send investors fleeing to purchase the dollar as a safer alternative to foreign currencies.

3. Miners are starting to dig in.

One of the more unimpressive sectors this year has been gold miners, which are tracked by the

MarketVectors Gold Miners ETF


. These stocks have been hit hard by

falling gold bullion prices

, which squeezed profit margins and depressed prices. Despite the fact that GDX has lost more than 42% this year, investors have been undeterred from the chart and have added over $2.3 billion in 2013.

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This unrelenting demand is a sign that gold mining stocks may soon regain their former glory. From a technical perspective they are probably in the best shape of this group, having already put in a low this year and may be coiled to spring higher. A combination of rising commodity prices and a falling U.S. dollar will likely help lift this sector higher. However, I am still wary about the volatility associated with mining stocks and consider them suitable for more aggressive investors looking for a value opportunity.

4. Shorting stocks has been painful.

The actively managed

Ranger Equity Bear ETF


has been a tough place to hang out this year as stocks have grinded relentlessly higher. I have noted several portfolio managers who have tried to call a top in the market and recommend a short strategy, only to get punched in the stomach by the bulls. HDGE has lost approximately 24% this year, which is on par with the inverse performance of the




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It really comes as no surprise that a

dedicated short ETF has had a rough year

, and this fund may ultimately see strong inflows once a sustainable correction begins to materialize. The advantage of an ETF like HDGE is that you get the expertise in security selection by the fund managers' who have a great deal of experience in that arena. Another alternative ETF to consider in a falling market is the

ProShares Short S&P 500 ETF


, which will more closely correlate to the daily inverse performance of the

S&P 500


I typically prefer to sidestep a decline in the safety of cash by reducing my position sizes or adding bonds to offset stock volatility. However, using a short ETF as a hedge can be a valuable short-term trading tool for a portion of the portfolio. Especially if your goal is to protect highly appreciated stock positions that you want to hang onto.

While I am avoiding all of these themes at this time, there will ultimately be a day when these ETFs come back into favor. The shifting trends of the market dictate that investors are prepared to actively swing their asset allocation to take advantage of new opportunities when conditions improve. I prefer to wait for a tradable bottom to develop instead of trying to catch a falling knife.

At the time of publication the author had no position in any of the stocks mentioned.

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This article was written by an independent contributor, separate from TheStreet's regular news coverage.

David Fabian is a managing partner at FMD Capital Management, a fee-only registered investment advisory firm specializing in exchange-traded funds. He has years of experience constructing actively managed growth and income portfolios using ETFs. David regularly contributes his views on wealth management in his company blog, podcasts and special reports. Visit

to learn more.