Market Report: Markets Plunge: Spiders Reveal Hidden Opportunity?

On Thursday, November 1, the market was slammed right out of the gate in early morning trading. Typically, Wall Street loves its Fed cuts. However, this time around, the investment crowd appeared to be somewhat disappointed with the quarter percentage cut, looking for a half percent that failed to materialize. Unfortunately, for the oblivious bulls, the Fed’s interest rate cut was priced into the market well before news of the announcement took place. Little time has passed and investors consider the decision to be old news.

Investors have now shifted their attention to the next slew of economic reports.

There are familiar woes on the horizon that serve to undermine the major indexes in the short term. Specifically, I’m talking about weak consumer spending and rocketing oil prices, which now threaten the psychologically important $100 per-barrel mark, a worsening housing market, inflation fears and, of course, the continuing credit crunch.

The list of negatives goes on and on.

So, what should investors do with their money? Leave it on the sidelines until the economic environment stabilizes? Absolutely not.

There’s always a bull market somewhere. Opportunity lurks around every corner; you just have to know where to look.

I performed some long-term technical analysis on the main sector SPDRs using Black Sheep Trader’s Oakes Momentum System, which focuses specifically on the Moving Average Divergence Convergence (MACD) and Direction Movement Index (DMI) indicators. The two that I have personally targeted and have rated a strong buy are the Technology Select SPDR Fund (XLK:NYSE) and the Energy Select SPDR Fund (XLE:AMEX).

Either you can invest directly in these spiders or look into purchasing stock in industry-leading plays that make up a decent allocation percentage within each respective fund.

Assuming that you have chosen to invest in the underlying stocks that make up the fund, I will continue to dive deeper and locate specific plays that should perform very well over the next year or two.

Here we go…

For the Technology Select SPDR Fund (XLK:NYSE), I have strong buying signals for Google (GOOG:Nasdaq), Adobe Systems (ADBE:NASDAQ) and Electronic Arts (ERTS:Nasdaq).

In using the above-mentioned indicators, you will see where I located a buy signal for this particular ticker on the multiyear monthly chart below.

As for the Energy Select SPDR Fund (XLE:AMEX), I have strong buys on Occidental Petroleum (OXY:NYSE), Devon Energy (DVN:NYSE) and XTO Energy (XTO:NYSE).

In my service, Black Sheep Trader, I provide more specifics and detailed analysis with regards to investment approach, research and specific buy and sell points. This method has enabled members to get in and out of equity plays on a shorter time frame while minimizing losses (5% on any underlying stock) and maximizing gains.

Additionally, I recommend stock and option plays as a means to offer readers more opportunities as well as an investment style that they feel suits them best.

Good investing,

Stephen