A great way to do so is through buying the inversely correlated UltraShort Basic Materials ProShares (SMN), which moves in the opposite direction of the underlying sector. On the daily chart below, notice how SMN was trading in a sideways range after breaking out above its downtrend and moving back above its 50-day MA. Then, it broke out above its recent range yesterday:



Since SNM has broken out, any pullback to the pivot (the breakout level shown above, around $35.50) presents an ideal buy point. Traders do need to be aware of the 200-day moving average, 2.5 points above the breakout level, but momentum from the four-week base of consolidation could easily push SNM through that resistance level. If not, SNM can still be sold into strength of that move for a quick gain of 2 points or so. As with the entire UltraShort family of ETFs, the best thing about SNM is that you can easily take a bearish position in a non-marginable, cash account such as an IRA because you are buying, not selling short.

If you, like ourselves, are having a difficult time finding trade setups with a good reward/risk ratio and high probability of success right now, that's the stock market trying to tell you something! Are you listening? Right now, the lack of quality setups tells us that many stocks and ETFs are in "no man's land," stuck between key support and resistance levels. They have about equal odds of moving in either direction in the short-term. When faced with such an environment, it's extremely important to avoid overtrading. If you don't ease up on both the quantity and share size of your trades, you'll likely "churn" your trading account, steadily bleeding capital out of it ("nickel and diming yourself to death," as my grandmother used to say). Don't forget that cash is a perfectly legitimate position! Now is a great time to be sitting in it, waiting for the market to show its hand for the intermediate-term direction.

Open ETF positions:

Long - EWH
Short - (none)