The Stock Playbook » Issue: 1/08/2008

Issue: 1/08/2008  

Posted Jan 09 2008, 03:05 PM
by Dave Dispennette

Market Summary: 

The market skidded lower in another fitful session today, with investors worried that the tumbling economy may not only cripple mortgage lenders like Countrywide Financial Corp. but also create problems for other companies like AT&T. Investors tried to take the market higher at many points during the day, but eventually succumbed to another stream of bad news. The Dow and the S&P 500 are down more than 5 percent so far this year and the Nasdaq is down nearly 8 percent, having been pummeled since Jan. 1 due to worse-than-anticipated readings on the economy. Today's events raised fears that fourth-quarter earnings reports, which start pouring in later this week, may not meet already lowered expectations. The Dow fell 238.42, or 1.86 percent, to 12,589.07, after ratcheting up and down through the day. The S&P 500 dropped 25.99, or 1.84 percent, to 1,390.19, and the Nasdaq, reflecting uneasiness about tech stocks after AT&T's news, declined 58.95, or 2.36 percent, to 2,440.51. 

Shorts: 

The recent correction has been hard and swift. We are more inclined to buy stocks at these levels, rather than shorting them. Shorting the market would have been a great idea a week ago. However, for those that have been emailing us the last few days, looking for shorts, I would suggest exercising caution. We would rather use this as an opportunity to add to some of our favorite positions on this weakness. As we usually do during market corrections, we've brought back our popular Watch List section, which will highlight a few stocks that we want to accumulate during this weakness. 

Watch List:

It is tough to recommend buying stocks in a market like this. There are, however, some stocks that we will slowly accumulate during these tough times. These stocks are investments. You still need to set some downside protection on them. These are stocks that we wouldn't mind owning in three years from now and will add to positions on weakness. We, personally, like using long term equity options (LEAPS) instead of equities in many of these cases, but that is for you individually to decide. Call us at (386)756-9728, if you need help figuring out the best plan of attack for you.  

We will start nibbling on: GS @ $175-$178, NYX @ $68-$70, RIMM @ $87-$92, AAPL @ $145-$150, and MSFT @ $31.

 



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