Peter Zimmerman's  Instablog

Memorial day weekend is upon us and hopefully most of you will be able to enjoy the nice long weekend. Serious traders are spending part of this weekend studying strategy, reading books, and plotting their approach to next week's trading action.

Anyone who follows my posts on Twitter understands that I am currently mostly CASH, and then short the rest. I will not buy a stock in a market that is in correction. It appears this correction may actually turn into a bear market (down 20% or more) sometime this summer, but time will tell and we need to keep our eyes on the market every day.

Anyone wondering how my portfolio has done in the market, let me just starting tracking it for you here. So far in May we are beating the S&P 500 and DJIA by 7% and the Nasdaq by 8%.

Here's a look at my current portfolio heading into next week (subject to change over the weekend):

59% CASH - for reasons stated above, market is choppy and in correction.

Short the Euro via $EUO. We have done very well with this fund, delivering a 2X return on cash invested.

Short oil via $SCO. This fund delivers 2X returns. There is nowhere for oil to go but down due to the current global economy. There could be a short term blip up in oil prices because of Iran but that would be short lived.

Small short on the Russell via $TZA. This is one of the weakest performing indexes when the market goes down.

Short F5 Networks $FFIV. Institutional investors are dumping this stock which means it will continue to go down.

Short JP Morgan Chase $JPM. So many reasons to be short this stock. Heaving losses trading, trying to hedge their risk against other, UNDISCLOSED positions. The stock could not break 34 last week which is another bad sign.

More later, please stay tuned.

Disclosure: I am long TZA, EUO, SCO.

Additional disclosure: I am short JPM and FFIV

Another good way to short the Euro is to by put options on FXE, the Euro trust ETF. This option might be preferred because you will need to tie up less cash. I have 6 month, 1 year, and 2 year options. Prices are optimal today as we experience another period of irrational euphoria that the Euro economy will be artifically propped up a little but longer! This strategy requires focus and a strong stomach.

Disclosure: I am short FXE.

A week ago I wrote an article about taking advantage of the financial debt crisis in Europe.  In the article I pointed out that it was a great investment over the next several months to short the Euro.  The instrument I use to do this is  Proshares Ultra Short Euro (EUO) which gives a 2X inverse of the USD price of the Euro.  3 out of 5 days this week that fund has fallen in value, mainly due to the exhuberance over the better than expected yield returns on some of the European Auctions.  Check out the article "Short-term Debt Auction Euphoria is Overstated" on MarketWatch.com, in it the author warns against thinking this is a sign that the sovereign debt crisis is close to being resolved.  Nothing could be further from the truth.

This is exactly the kind of thing I was talking about when I said you need "a strong stomach" for this investment.  If you shorted on the day my article was published you are in the red, but hold on tight, there are all lot of issues that still need to play out before the European debt crisis comes close to being resolved.  The action over the next few months, as well as the outcome of the Greek situation will give us a better idea of how long to hold on to these shorts.