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Shopping Lists for Possible Plays


...if we aren't going to play in the market just yet, what constructive activities can we spend our time doing?


Good morning Minyans.

Despite a late afternoon bounce, we have another nasty open on our hands and once again it has helped to remain on the sidelines doing nothing. It isn't fun to discuss and sure won't get me much press but the strategy of sitting and waiting has saved me on more than one occasion and should be embraced by all.

Whether we are developing a longer term top, or just going through another nasty shake, the bottom line is we are smack dab in the middle of great uncertainty and nervousness which ultimately transpires into the bi-polar action you see in the market place. In my opinion it is the equivalent of a class-5 rapid however it is optional and rather than chance it, if you are looking for some action, consider a family vacation. (See also Scott Reeves' article Tips For Family Holiday Travel.)

So, if we aren't going to play in the market at this very moment, just what constructive activities can we spend our time doing? Well, that is an excellent question. I have been spending my days building two lists in addition to brushing up on my inverse ETF plays. Certain sectors have already confirmed a longer term downtrend such as financials, and are ripe for shorting if that is your style. It is hard to find any that haven't already made a second thrust lower, however one that is interesting to me is Deutsche Bank (DB). The stock has been basing since August around the $125.00 level after falling off lows. From my vantage point it is only a matter of time before this stock breaks below the $120.00 support on its way back to par. Outside of the financial sector, I am eyeing other sectors that may confirm new down trends and possess underlying stocks worthy of shorting. Companies in the retail sector such as Sears Holding (SHLD), Best Buy (BBY) and Dillard's (DDS) look vulnerable for more selling and are worthy of keeping on watch.

On the flip side of the coin, if this is only a major shake before we head higher, I am developing an earnings winning list of stocks that I will look to in the event we move out of this current short term down trend and head higher. Exchanges such as Nasdaq (NDAQ), Intercontinental (ICE) and CME Group (CME) are holding well and look attractive and would be an area I would look to first.

As mentioned above, I am also brushing up on the long list of inverse ETFs that are out there. If technology is going to fall and meet the rest of the market it makes sense to keep an eye on the ProShares Short QQQQ (PSQ) or ProShares Ultra Short QQQQ (QID). If the S&P confirms the recent decline I would favor the ProShares Ultra Short S&P (SDS) and look to add this to my separate client accounts in a slow and methodical fashion.

It is still a bit early and so far we are directly in the middle of the chop where high emotions rule. If you haven't done so already, raise some more cash, resolve to sit idle and do nothing, build a few watch lists and then take a long walk. The market will be here when you return.
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Positions in BBY, ICE

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