Surviving the bear market.

A few people asked me how to make money in a bear market. It’s not as easy as it is when everything goes up, and you can jump on any hot stock and ride it to the moon (think CROX, VMW, HANS, LULU, AAPL, etc a few months ago.
My number one rule is never to keep any long positions overnight. There are almost always bad news in the morning, and when that happens does not matter how good of an equity you are holding – it will get killed with the rest of the market. That’s not to say you should never have a long position at all… in fact as it often happens selling gets overdone for some stocks and picking up something in the morning and selling in 2-3 hours for 5-10% profit is always a nice way to start a day.
Short the momentum stocks that lost their momentum. Right now there are too many of those in this market. The only caveat – buy out of money calls to protect your shorts. You don’t want to get killed if the stock starts running again.. and on good news there will be these pops.
This is why is like to short or buy puts on the indexes. It’s much safer to assume they will go down over 3-4 sessions. SPY, QQQQ are the obvious indexes to play with.
I am saving the best for last. There are so many Ultra short ETFs now that let you bet against an industry without a risk of options (expiring) or shorts (blowing up and taking all your money, having to cover). These ETFs move 2% up for every 1% down for the underlying indexes, My favorite Ultra short ETFs are:
- SKF (Ultra short financial). It’s safe to say that there will be more selling in that sector and I bet someone big will go under.
- FXP (Ultra short China). That bloated market is bound to implode.
- QID (Ultra short Nasdaq 100). Technology seems to have followed the financials in the last couple of month.
As you can see there are plenty of ways to making money in a bear market, just have to be more careful – eventually the bear market will end.. you can’t stay bearish forever.

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