Shorting Time - High-Time??

I have traditionally been a buy and hold investor for the last few years. However, with the experts predicting slow economic growth and/or recession for 2008 combined with the housing drop, I have been selling off my profitable positions for the last 2-3 months. I still hold some international positions that I think dont have too much downside and a good long-term outlook, and of course some laggards. I have been sitting mostly on cash and watching the markets. I added money to couple of CDs before the two rate drops we had recently - which have given me better returns than the S&P 500 in the same timeframe.

As true as it might be that timing the markets is futile, I think time has now come when I think I should try my hand at shorting/trading in the direction of general market fundamentals. I have been observing the stocks/ETFs that I'd like to short, and my general thoughts and ramblings are below.

How shorting works:
For all practical purposes, shorting is exactly the opposite of buying a stock now, and selling it in the future for a profit. Shorting is a strategy that can make you money when you think that a stock is destined to fall further. You first borrow shares from the brokerage, and sell them off. You then buy these shares back at a lower price(theoretically and hopefully) and return them to the brokerage, pocketing the difference. Keep in mind that shorting is risky, but can work great in a bear market.

I have been thinking about the following strategies:

• Shorting ETFs: If I want to start with low-risk, shorting ETFs might not be a bad idea. Two housing ETFs that come to mind are iShares Dow Jones U.S. Home Construction ETF (ITB) and S&P Homebuilders SPDR (XHB). If you think the economy is headed for a tank, you can also short ETFs like the Financial Sector Select SPDR (XLF).
  

• Buying Short ETFs: ProShares has a number of ETFs whose performance is inversely proportional to the underlying index performance. If you buy the ProShares Ultrashort Real Estate (SRS), and housing keeps going down, SRS goes up in value. Same is true in the Financial Sector for ProShares UltraShort Financials (SKF).
  

• Shorting stocks: Shorting housing stocks seems like a good strategy at this point, considering the housing has still not bottomed, and they all have room for further downside. Shorting stocks like Lennar (LEN), Centex (CTX), DR Horton (DHI) seems like a good strategy. Graph below shows the continuous drop in these three, and from all the negativity around housing, this graph should maintain its downtrend atleast for the next 5-6 months:

Few notes:

• Do not, again, do not let a trade become an investment. This is not buy and hold. Decide on a percentage and sell it off after that. I think my initial limit would be 5%.
  
• Average over 2-3 buys and buy on up-days (for shorts) and down-days (for longs).

Voluntary disclosure: I do not hold a position in any of the securities mentioned above, but might start one soon.