Why do I say selling munis is contrarian? The first reason is that they have been rallying for months. A second reason is that more than a few people are recommending them as a good investment in a muddle-through environment where the recession doesn't get much worse or a weak recovery starts. In such a situation, U.S. Treasury bond rates may not rise significantly. One of my favorite analysts, Brett Steenbarger, said last week, "In a low interest rate environment, those tax-free yields have looked attractive to retail investors and, amidst hopes of economic stabilization, investors have been willing to move away from Treasuries and into munis." There are no ETF options that are short munis. The iShares S&P National Municipal Bond ETF ( MUB) can be shorted. Another possible short is the SPDR Barclay's Muni ETF ( TFI). Be aware that in shorting a dividend paying stock or ETF, you will have to pay any dividends that are issued while you are short. If you buy put options on either of these funds, you will have a short position with no exposure to paying dividends, but you risk losing the option premiums.
5. Sell Oil
Here is another potential 60 mph train that might be real. Just look at the weekly chart for the U.S. Oil Fund ETF ( USO), which has risen 46% since Feb. 26.
Note that the MACD and RSI trends are still clearly up. The one sign of potential weakness is the declining volume since early March. A possible entry point for going short oil would be when the MACD curve turns down. However, an entry trade at the end of March when the MACD started down (see blue ellipses) did not produce any significant opportunity for profit.
In trading on Monday, shares of the ProShares UltraShort Gold ETF crossed below their 200 day moving average of $91.62, changing hands as low as $91.43 per share. ProShares UltraShort Gold shares are currently trading down about 2.4% on the day.