Short Commodities Position Hits Record Highs; Portfolio Well Positioned for Any Coming Rebound

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Your position in the PowerShares DB Commodity Double Short ETN (DEE) jumped 9.87% through Thursday to hit record highs. Your short position in the iShares MSCI United Kingdom Index (EWU) also jumped 9.49% in the first four days of trading last week. These are the positions which tend to do well during periods when the market sells off.

Your short position in the CurrencyShares British Pound Sterling Trust (FXB) also gained as the British pound sterling tumbled below the $1.45 level once again. I was shocked to see the British pound sterling at parity with the euro (1 British pound = 1 euro) this past weekend in Brussels. In the summer, the pound still bought close to 1.30 euros — just about where the U.S. dollar stands in relation to the euro today.

Your long positions in Millicom International (MICC) and the iShares MSCI Emerging Markets Index (EEM) both fell sharply on the pullback in global markets. Last week’s Global Bull Market Alert pick, iShares iBoxx $ High Yield Corporate Bd (HYG) dropped slightly, though not nearly as much as your long positions in equities.

Overall, the market is still locked in a trading range, which makes it a tough market in which to make money. The bullish mood of early January has all but evaporated, and the optimistic breakouts in holdings like MICC and EEM seem like a distant memory. Nevertheless, after seven consecutive days of drops, the market technically is as oversold as it has been in several months. That means you can expect at least a technical bounce from current levels next week — boosted by positive sentiment from the Obama inauguration. Look for MICC and EEM to perform strongly on any shift in sentiment.

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Portfolio Update

The PowerShares DB Commodity Double Short ETN (DEE) hit a record high of $82.39 on Jan. 15. I’m tempted to take profits here, but I’d like to see a gain of at least 15% before we do. I also want to keep it in the portfolio as a hedge against market downturns.

iShares MSCI Emerging Markets Index (EEM) fell sharply during the past week on the sell-off in global markets. Emerging markets will bounce strongly when markets turn.

Your short position in the CurrencyShares British Pound Sterling Trust (FXB) gained last week as the British currency dropped back down to a near recent record low of $1.44 against the U.S. dollar.

Your short position in the iShares MSCI United Kingdom Index (EWU) was up last week, as global markets tumbled. It was also boosted substantially by the weakness in the British pound sterling.

The iShares iBoxx $ High Yield Corporate Bd (HYG) dropped slightly during the past week as risk aversion soared. All in all, it held up surprisingly well, and this indirect way to bet against the bubble in U.S. Treasuries should soar once sentiment improves.

Millicom International Cellular S.A. (MICC) fell last week as global markets retreated. This highly volatile pick can be back at $50 in a few trading days if market sentiment turns.

P.S. Markets and investors’ portfolios have taken a beating during the last few months. With a new president, a global economic downturn, U.S. recession, and $700 billion government bailout, investors are left wondering — is the worst behind us or is the other shoe about to drop? What do I do now? Making profitable investment decisions during these unprecedented times can be difficult if you do it alone. Attend the four most important days of the year in 2009, February 4-7, at the Gaylord Palms Resort and learn how the experts are finding profitable opportunities during the market crisis and how to position your portfolio for safety and growth. To register FREE, call 800/970-4355 and mention priority code 012653 or register online!

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Despite the sell-off in global stock markets over the past few days, the news so far in 2009 has hardly been all bad. Overall, stock markets have been strong since Thanksgiving. We had a traditional Santa Claus Rally. And the performance of the market in the first five days of the New Year has set a positive tone for the coming year. It is an old Wall Street maxim that as the first five days of January goes, so goes the market for the year. How did the Dow and the S&P 500 do on this measure?

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