Sky is falling - and here is my shopping list

Sky is falling. Asia and Europe were down big on Monday, as fear of a financial meltdown spreads to the rest of the world. The new fear over the weekend is that big troubles with bond insurers could affect some $1.5 trillion of bonds. Expect another big sell-off on Tuesday. That could set us up for a sharp rebound (with or without the FED stepping in to help) that will eventually take the S&P500 index from a possible next week\'s low of 1260~1270 to a rebounding high of 1380 – 1420 area. This kind of bear-market rally (back-filling) happened from time to time during the 2000 – 2002 bear market (see the monthly SPY chart below). But once the rebound is over, the market will most likely resume its slide again. So the plan here is to use this week\'s further sell-off to load up some stocks, but be ready to sell into rallies once the market moves back to the 1380 – 1400 area.

Expect a choppy ride for the rest of the year, but I don\'t expect this to be the 2000 – 2002 kind of bear market that lasted for over 2 years long. So I\'ll play more cautiously until a clearer picture emerges - maybe by the second half of the year.

Meanwhile, here is my shopping list for an anticipated sharp rebound (disclaimer: do you own research as the market is very risky at the moment):



S&P 500 proxy SPY monthly chart