"ETFs are now being used as tactical and strategic tools, both by individual investors, and more influentially, by professional investors," notes Peter Way, who analyzes the activities of million dollar market makers.

In his Block Trader ETF Monitor he notes, "In just two recent weeks there have been $1.5 billion of new bets against the stock market’s rising." Here, he looks at their downside bets.

"The total now bet against the market rising is over $10 billion, in the column to the left. And most of the big bets have been in levered short instruments, where the payoff for being bearish is about doubled.

"A quick explanation of these ETFs may be useful. These are instruments that investors can buy long, like ordinary stock investments, but they have been so constructed from the outset that when prices of the holdings of the fund go down, the price of the fund goes up.

"No worry about unlimited losses from being short something that grows to the sky. They are a simple feat of financial engineering that is completely legal and well thought out.

"Their levered cousins take the financial engineering a step further. In effect they use the margin rules to accomplish a near-2-for-1 price impact, but all within the initial structure of the ETF.

"Now there is no further worry about margin calls from your broker. All the adjustments are taken care of automatically at the ETF headquarters and are simply reflected in the market value of the instrument.

"We’re not negative on this kind of strategy, as long as it is well-founded and clearly understood. Market history shows that corrections usually are much briefer than bull periods, so it is important to stay on your toes and pay attention when in these instruments.

"INdeed, our analysis of activities by million dollar market makers suggest that Proshares Ultra Short Nasdaq 100 Index ETF (ASE: QID) may be one of the best bets at present. If you are looking for thrills and spills, here you are, but stay alert.

"In addition, some investors think China investing may have gotten overdone. In response, the ETF community brought forth the ProShares UltraShort FTSE/Xinhua 25 (ASE: FXP), a levered short version of the FTSE/Xinhua 25 Index. In this case, $769 million of investment has been attracted by the FXP in 3 months since November.

"Among sectors, there are three levered short ETFs that look appealing. One is ProShares UltraShort Oil & Gas ETF (ASE: DUG), another is Proshares UltraShort Real Estate ETF (ASE: SRS), and the third is ProShares UltraShort Financials (ASE: SKF).

"Apparently all three have a cadre of convinced believers that the stocks in their holdings are headed down, and the market-makers seem to agree."