if you don't trade futures but want to trade S&P, use SSO/SDS. If you are a bit strapped for cash, long or short the cheapest (SSO considerably less than SDS right now....instead of SDS, short the SSO).
Be careful with 60/40 rule for ETFs. IRS has not clarified anything yet about them. ETFs do not meet all the 1256 requirements and will be subject to regular capital tax treatment. A few links: http://www.greencompany.com/EducationCenter/GTTRecTaxTreatmentTraders.shtml http://options2.registeredrep.com/ar/finance_tax_treatment_broad/index.htm
One trades stocks for outperformance (or vice versa for shorts), or as a hedge/spread. There are many years where the S&P is up single digits, but a basket of good stocks are up 30-40%. Or in bear markets, focusing on the worst stocks is a much better bet than short S&P.
But that's my point about SSO. It turns the SP500 from a sluggish average of slow growers into an average of fast growers, making betting on individual stocks less necessary. Also, knowing which stocks will underperform the SP500 (or SSO) is not as easy as it looks. Indeed, the bank/insurers have been easy targets. However, you would have made about the same shorting Citi and buying the reverse of SSO. Knowing the details of a company is not always that simple and sometimes you are better of just shorting the main index. I would have been more able to make a general bet about the SP500 last august, than to determine whether or not JPM and GS were heavily implicated in the OTC derivatives market.