How to play in this volatile market?

I'm not sure about you but I have been very bearish for the stock market overall for quite some time as you know. And I don't believe that we have seen the real bottom yet for this correction. As I told you recently, September and October are statistically and historically bad months for stock market. This does not bode well for a recovery if there is one ongoing. On August 9, I told you my game plan. It appears that I was a bit too optimistic in thinking that S&P could rally back to about 1250 before resuming its another leg down.  But it did try and was close to that level at around 1225 or so end of Aug before turning lower again. I took the opportunity to exit my quite many long positions for profits in the past 2 weeks. As I said, I want to be prepared by having as much cash as I can for the coming buying opportunities. While we are waiting for the market to hit its real bottom, is there a strategy to play in this very volatile environment? I think I found an interesting one.

The strategy is called the FactorShares 2x  Gold Bull/S&P 500 Bear, which offers a leveraged gold long paired with a double short S&P 500 index with daily resetting. This is an ETF with a symbol of FSG. You can simply trade it just like any stocks. What it intends to do is to make money if gold prices increases while S&P index is dropping, and it is leveraged by 2 times. This sounds a good idea to me since I do think in the next 2 months or so at least, the overall market will test a new low but gold will further appreciate. What a great concept to capture these 2 opposite trends in one trade!

However, I must warn you that this is likely a risky trade and there is no guarantee that it will for sure bring you a profit. You have to be prepared for a loss if you do want to try. Two main reasons:
- Of course, on one is more clever than the market itself. It is very cunning and likes to tantalize those who want to play with it. Regardless how much I believe what I think, I could be wrong. The market may turn to go up without prior notice and gold may simply plunge. If so, FSG will be doing very badly.
- FSG is a very new ETF, just debuting in Feb this year. One thing I have learned about EFTs is that some of them may not do what they are supposed to do. The most notorious one is UNG, an ETF supposed to track the trend of the natural gas. This fund actually is behaving almost like an inverse fund, going down while the natural gas was ascending. So it takes time to ensure that an ETF is indeed performing as it should be. In the past 6 months, FSG appears to have kept its promise but I don't know if this may change.

For myself, I will try FSG. I call myself as an informed and defined risk taker. As long as I know the risk is within my control, I don't mind to try. FSG indeed sounds a very good strategy in this very unstable and volatile market but I will not go crazy with it given the uncertainty involved as discussed above.