Except for France, markets around the world were down overnight, with Asia getting smacked particularly hard. Japan and Shanghai were down more than 1.1% and the Hang Seng down more than 3%.
The world is uneasy about the state of Greek politics and the ever increasing odds of Greece leaving or getting booted from the Euro.
The situation has taken its toll on US stocks as traders have been greeted to one up day in the last two weeks. While the indexes are reaching oversold levels, the action has put the NASDAQ, Dow, and S&P in a terrible technical analysis place.
Each member of the trio is now under key support levels; maybe they’ve even broken a head-and-shoulders neckline, which would mean more, perhaps a lot more downside to come. Top Equity News believes the index 200-day averages is the next chart destination Wall Street doesn’t straighten out its act.
The current environment leaves investors in a difficult spot. There have been some pluses, especially in the first quarter earnings results. With more than 90% of the results tabulated, nearly 67% of S&P member have exceeded their consensus earnings estimates. Meanwhile, profits and sales have grown by nearly 7% and margins remain high at 9% versus the historical norm of 7%.
If Q2 is a solid as Q1, then stocks are on sale.
On the other hand, the recent run of mostly disappointing economic news from a lower than expected GDP to horrible jobs numbers has economists and brokers revising their outlook for the economy lower.
If the forecasters are correct and the economy grinds to a halt, then Q2 earnings are likely to fall and so are stocks. The combination of good earnings news versus the volatile EU debt crisis and underwhelming US news on the economic front muddles the waters. Toss in a technical picture that shows the indexes drowning and it becomes downright confusing.
So what’s an investor to do in uncertain times like these? Three ideas come to mind.
The first and most obvious is to move some money to cash. Never, ever make the mistake of thinking it can’t go any lower than this. It can and probably will as new lows are typically followed by new, lower lows. Eventually the bleeding stops, but this mind frame turns small losses into big ones and adds dead weight to your portfolio. Everybody knows of theses anchor stocks, when I just get back to breakeven, then I’ll sell it. Only it takes years, and in the meantime, better stocks zip right on by your dead holdings.
The second idea that could help stem the tide is to write covered calls against some of the stocks you already own. It is the practice of selling another investor the right to buy your stock at a set or specific strike price. Say you own ABC stock, and it’s trading at $43, and the option to buy ABC at $45 within the 90 days is trading at $3. You can sell the option and receive $300 for every 100 shares of ABC you own. As long as ABC stays below $45, you keep the money and the stock. If ABC trades at or more than $45 when the option expires, you sell the stock at $45 and keep the money.
The third option is to short stocks. Most people don’t like to get involved with margin as it can lead to bad habits and shorting stocks can be intimidation. The unknown is always scary. TEN’s preferred choice is to buy an inverse ETF that acts like a short. Something like ProShares Short S&P500 (SH) makes it easy to bet against the market. The funds objective is to seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the index. In other words, if the S&P falls 1%, then SH gains 1%.
These are three easy ideas you can implement right now. When the bulls come charging out of the gates once again, you could be better positioned to take advantage of the next run.
3 Easy Things You can do to Protect Your Portfolio When the Stock Market Sucks is an article from: 
