Stocks near meltdown? 3 picks for a bear market

One indicator is pointing to a crash. Here are some funds that could help investors protect themselves.

By MSN Money Partner Jan 10, 2013 9:49AM
 Stock market report ULTRA F Digital Vision Getty ImagesBy Teeka Tiwari, editor www.ETFWarrior.com

What do this market and a fictional diner have in common?

Have you ever watched Monty Python's movie "The Meaning of Life"? For those who skipped on this nonsensical British humor film, one scene depicts an absurdly overweight man, Mr. Creosote, sitting in a restaurant gorging himself. Just when you think he can't eat another thing, he decides to finish off with a wafer-thin mint. As soon as he finishes eating it, he promptly explodes.

Why have I regaled you with this story?

It's because one of the most accurate indicators I follow is starting to flash a warning sign that the market may be about to do its best impression of Mr. Creosote.

The Investors Intelligence Advisors Sentiment index has skyrocketed to 51%. This means that 51% of all advisers are bullish. Let me ask you this: How many times have you seen the crowd get it right when it comes to the stock market?

Exactly! And that is why I'm worried. Readings from this level generally point to trouble ahead. So what's an investor to do? Well I'm glad you asked, because here are the three ETFS's to watch.

iShares Trust Barclays 20+ Year Treasury Bond (TLT)
TLT ETFDuring times of market crisis you want to be in bonds. Yes, I know the yields are horrible. TLT is a short-term safe haven trade in 20+ year US government bonds.

You can get long here at $119 with a $115 stop the target is $126.

PowerShares DB US Dollar Index Bullish (UUP)
UUP ETFWhen the spaghetti hits the fan the world flocks to the dollar.  Use UUP to weather the coming storm. Can get long here at $22; use a $21 stop with a $23 target.

CurrencyShares Australia Dollar Trust (FXA)
FXA ETFCommodities will get clobbered when the market drops. Australia is hugely levered to commodities, so consider shorting their currency via the ETF FXA.

I'd wait for a move to $106 to short it, with a $107 stop and a $100 target.
84Comments
Jan 10, 2013 2:19PM
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"crash" is a term that doesnt quite capture what is going to happen to the american market...freefall spiral into marshal law is a much better description     they keep acting like there is money out there for them to use, there is not, every dime they take from consumers drops the gdp one more dime.....sure america needs to tax everyone...fairly.....everyone.......that is not happening, we really need to dump income tax and go to a sales tax, everybody pays.....nobody gets a refund ever.....too easy   and it is fair no matter what idiot liberals say.....a millionaire spends a million dollars, he gets taxed on a million  a family of four spends 40000 a year, they get taxed on 40000  what is wtong with that????? 

 

Jan 10, 2013 2:40PM
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Was there any real evidence in this article suggesting why the market would implode? No, just pure conjecture.

Author is probably just hyping something right after they invested. Typical pump and dump.

Don't take MSN investment advice seriously.
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Msn Money says the market is near a meltdown..

Msn Money says the market is near a record setting recovery..

Your'e losing credibility Msn..

Jan 10, 2013 2:29PM
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You focus solely on AAI Investor sentiment as your reason for these trades.  I call that insanity or maybe just trying to get an article written without doing any work.  I am not going to argue with your final picks, but jeez, there must be a million other factors that affect the markets.  I for one, am not going to invest based on one indicator that changes frequently.  My recommendation is to invest for the long term with a balanced portfolio.  Maybe lighten up a little on equities or bonds when we have a mid to longer term downtrend and get back in when things turn around.  Go for dividends as well.  Chasing AAI and interpreting it to determine your picks in wil;l get you nowhere fast.
Jan 10, 2013 3:09PM
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Is there anything more irritating than a web page that blares an ad at full volume??
Jan 10, 2013 3:43PM
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This is the most uninformed article on investing I think I  have ever seen. Going to 20 year Treasuries when the yield is at an all-time low is the exact opposite. Yes, the money coming out of stocks in a hypothetical  crash has to go somewhere, but it is likely in cash, not long term bonds. It might even be Euro-based cash rather than a collapsing dollar, or some other currency. Will commodities collaps with the stock market? Not typically, but they usually do in a declining economic environment, which is the more like scenario as we continue to print money trying to inflate a dormant economy. In that case, hyper-inflation would likely off-set declines in commodity demand.

 

I don't know who this person is who wrote this article, but they should stay away from investing since they clearly are dangerously uninformed.

Jan 10, 2013 1:41PM
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  Silver should be flying through the roof soon.
Jan 10, 2013 3:22PM
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One can only conclude that the editors of MSN money were hard up for a commentary today and decided to run this utter nonsense.
Jan 10, 2013 5:35PM
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Financially sound businesses have survived the recent recession and will be around for a long time. The governments inability to get spending under control and the massive debt that has resulted has created a lot of uncertainty in our country for businesses and individuals. When people do not feel comfortable about the future they play it safe and don't risk their money. This only results in a slowing of the economy and more uncertainty. If the idiots in Washington would just show some sign that they were addressing the overspending and had a plan to balance the budget our economy would grow. Right now nobody has any idea what the tax rates are going to be in the near future which makes it impossible to plan for anything. To bad we couldn't just stop paying everyone in Washington until they did their job and got our finances under control. Then maybe we could take a big loan from their private pension plan and make congress pay into social security and buy their own healthcare. Problem is they just are not affected by the problems they cause like the rest of us.
Jan 10, 2013 4:00PM
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Cry and complain all you want, the next two years will mirror the last two. Shorts, don't try to scare me into selling !
Jan 10, 2013 3:16PM
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Dow 1000 is not a silly number.

The Too Big To Fail (or Jail) Banks have deployed their Financial Weapons of Mass Destruction, aka derivatives. These highly leveraged and risky investments may destroy the financial system, bringing down the entire market. It would be a good idea to have some money outside the banking system in gold and silver in case the banks crash, as they did in the Great Depression.

Eventually, with all the money printing going on, inflationary pressures will rise dramatically, and the bond market will implode with investors demanding higher interest rates for all bonds. Being bullish on the U.S. dollar as the article suggests is a bad idea. That makes long term Treasury Bonds an extremely bad idea. Gold and silver should do well in an inflationary environment.

How can you have both deflationary and inflationary forces at the same time? We call it Stagflation, and it happened in the 1970s.

Jan 10, 2013 2:11PM
Jan 10, 2013 2:12PM
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The market could drop to zero tomorrow,and guess who would be responsible? Nobody. 
The dollar could be devalued to toilet paper status and guess who would be responsible? Nobody. 
The government could spend a few hundred trillion dollars tomorrow on whatever it pleases and guess who would be responsible? Taxpayers. 
Talk about being caught between a rock and a hard place.
  I am hoping if it  "all falls apart" ... what is left of civilization will still trade,and hopefully,the allure of gold and silver will still be viable. If not,then I can use the metals to make bullets.  
  Yikes...
Jan 10, 2013 4:43PM
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Articles like this make readers turn away ....why would anyone want to read it.  There is enough garbage coming out of Washington .... .
Jan 10, 2013 5:26PM
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be great for a crash, since when is a bottle of water  worth $2, pair of $30 shoes worth $185, makes no economic sense, rich stockholders and CEO's who create or produce nothing need to come back to earth, way too many freeloaders in the world, capitalism without consumers is doomed.....nothing will change until the working class is paid a LIVING WAGE !!!!!!!!!!!!! 
Jan 10, 2013 2:41PM
Jan 10, 2013 3:54PM
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If one would like to take the time and do a bit of research you might find that there is a ton of institutional selling going on right now in many consumerables.  That has almost always precipitated a fall. JMHO
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the stock market has only been kept afloat by Bernake printing money at night and loanign out to the banks at zero percent so they can buy stocks and bonds and US T-bills

 

this house of cards is not helping the real economy which is worse now than back in 2008 when the financial market collapsed.

 

Housing is still in the dumps the only new building I see in my town of Houston is new high rise homes starting at over $1,000,000 each there are like 6 projects going right now and about twenty new homes in River Oaks (where the rich people live) being built after they tear down the existing home worth 5 million.

 

So we have like 20 new homes going up at a cost of about 8 million each and add in the 5 million each for destroying the old home a great sucking of 260 million out the already bad economy and perhaps 200 jobs paying $30,000 a year created for like 4 months.

 

So we are taking $260 million out of the Houston economy and putting back $1,500,000 in wages and perhaps $30,000,000 in materials and adding about $230 million into the pockets of the builders and the real estate people involved making them even richer. Perhaps at most 40 people here are going to get about $8 million dollars richers.

 

Pretty much the whole system is broken and money is flowing to the top very fast now and things are going to collapse once the Chinese mafia take over and tell the US mafia not to print any more fake monies

Jan 10, 2013 3:15PM
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What would make you think ANY stock is good? We are no longer a self-sustaining nation so NO stock will survive the crash.
Jan 10, 2013 4:30PM
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Amazing how well this market does hold up.  Some of the employees are talking about not being able to file for their tax returns because of a new delay.  Others talking about an even  possible delay in Social Security checks.  One would think this would scare many half to death.  I don't think reality has scoured its way into some lifelong American consumers psyches yet.  Folks do you really think this nonsense can go on forever?  And do you really trust the DC crowd to do the right thing for anyone but those they are beholding to? Lifelong habits and attitudes can be difficult to change. But over the course of history those lithe enough to move out of the way stand a better chance of survival.  In other words rigidity can be a liability.  JMHO
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