"1 point in WMI in 1 day is hardly taking a long term view which...

"1 point in WMI in 1 day is hardly taking a long term view which seems to be your current argument"

exactly right.   I was trying to be sarcastic    and pointing out short term differences between index and managed funds.

40% cash in WMI.
don't forget that they can deploy that cash when opportunities arise.  they won't always be holding that much cash and weren't previously.
they must be worried about further market falls and that small caps are too expensive now.    time will tell who is right.

by all means trade the XSO,  but history has shown that the area of the Aussie market where fund managers have a good record
of strong outperformance versus the index is in small caps and micro caps,  maybe also midcaps.
they certainly do not with large caps.
which is why I prefer to choose my own large caps, and sometimes buy the large cap ETF,  or global ETFs, 
but leave the small & micro caps for the higher quality fund managers ( either LIC or unlisted ).   
I just don't think the XSO index is much good,  but if you want to trade the ETF,   go for it .
but history has shown that very few people can accurately trade market direction....
good luck with your strategy.