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Storming the Opening Bell


Put away the shotgun and get out your sniper rifle. Instead of shooting at everything that moves pick your targets carefully.

Sometimes no matter how prepared or well balanced your portfolio, you are going to have a rough day in the market. With Friday's action and the continued selling in world markets, Monday seems to be setting up for an ugly open. It goes with the territory. How we respond to these events may be more important than the event itself.

Disappointing earnings from some of the key Dow components as well as the beloved Schlumberger (SLB) have set up an interesting picture. Today's open may have more in common with the scene of assault craft storming the beaches of Normandy in Tom Hanks' "Saving Private Ryan" than the traditional ringing of the bell. As the bell rings and the gate lowers on your landing craft, comrades fall one by one. The beaches turn red just like the screen on your desk.

There is no way to avoid it. Earnings this quarter are not what Bull Markets are made of. For stocks to regain their footing there will have to be visible improvement in earnings or lower valuations to attract deep value investors. We can talk about how the fed is on our side, interest rates are low, global expansion, yada yada yada. In the end fundamentals will rule and right now fundamentals in the US are weakening. You can't have this many key companies disappoint without questioning the economy's health.

Investing 101 tells us that when we have opportunities like today we must by the dip. If you are going to Rambo up and step into the fire fight let's talk about a few ground rules. First put away the shotgun and get out your sniper rifle. Instead of shooting at everything that moves pick your targets carefully.

Who had great earnings in the last few weeks and lived up to or even exceeded expectations? The list is short but they are out there. Intel (INTC), Google (GOOG), and Textron (TXT) come to mind. If stocks with positive earnings surprise or some other powerful catalyst get hit, one may look to place bets here. These will be the first to recover and regain their leadership. Stop focusing on the 52 week low list. The prospects for Washington Mutual (WM) or Citigroup (C) didn't get any better just because they are a few points lower.

Don't be impatient. Every sell off is different, but you may want to wait at least until 10:30 before you place your trades. Look to buy over the course of the day. Leave some ammunition for later in the afternoon. We may need it.
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Positions in INTC, TXT
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