Five ETFs With More Downside in Them

With the S&P 500 and the Dow Jones Industrial Average fresh off their worst quarterly performances since the fourth quarter of 2008, it may seem almost implausible that stocks may have more downside left in them. The reality is there is still ample room to the downside and if a fourth-quarter bounce does not materialize and do so quickly, there are scores of sector and country ETFs that are vulnerable to more declines. Let's have a look at five ETFs that decline even more and the inverse options for taking advantage of those declines. Market Vectors Coal ETF KOL: In the past two weeks, three of KOL's major constituents have issued production warnings. In the coal business, that means weak demand. That's bad news for any company in any industry, but in the high-beta materials group, it's death-knell. KOL will eventually offer some value, but not before falling another 10%. Play the ProShares UltraShort Basic Materials SMN. Vanguard MSCI Europe ETF VGK: It may not seem reasonable to bet on more declines for an ETF that is already down about 25% since May, but this is Europe we're talking about. The combination of substantial headline risk and a possible violation of support at $38 make VGK just as vulnerable today as it was a month or two ago. Play the ProShares UltraShort Europe EPV. Guggenheim China Small-Cap ETF HAO: We used to love the Guggenheim China Small-Cap ETF. Unfortunately, this ETF hasn't been worth loving much this year and the recent violation of support at $18 isn't a positive sign. Like KOL, HAO will be a nice bargain at some point, just not now and with no China-specific ETFs acting right, ones with heavy small-cap exposure are to be avoided at all costs. Play: ProShares UltraShort FTSE China 25 FXP. PowerShares QQQ QQQ: The Nasdaq had been holding up relatively well until last week. Now it looks like it might be the most vulnerable of the three major U.S. indexes. Apple AAPL and Amazon AMZN simply cannot do all the work here and the longer the market declines, the more those two studs become vulnerable. QQQ could easily test $49 in the next few days. Play: ProShares UltraShort QQQ QID. Vanguard REIT Index ETF VNQ: Most REIT ETF charts look the same. They suffered nasty spills in July only to muster a rebound in August that fell well short of getting them back to their previous highs. We've argued that eventually the toxic view of bank stocks will trickle down to REITs. Whether that's fair or not isn't relevant. Traders should only care that it may happen and it may be happening right. The longer VNQ hovers around the $50, the worse it looks. Play: Direxion Daily Real Estate 3X Bear Shares DRV.