Garbage Time

 | Nov 16, 2012 | 11:15 AM EST
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Once again, the market is making it difficult for traders looking for bounces in Apple (AAPL) and the indices. The pattern lately is to start with mild positive action followed by a quick selloff.

I suspect the failure to bounce is trapping more and more traders, who add to the sales pressure when the bounce fizzles. They are setting stops at the day's low, which gives extra juice to the downside when those levels are breached. The premature bounce buyers have to keep washing out and crushing hope before we finally see a decent bottom.

I'm playing a little bounce action myself with the ProShares Ultra S&P 500 (SSO), but I haven't done anything sizable yet. I'm keeping a core position and looking to add if the market can take out day highs and develop a squeeze.

The other thing on my radar is low-priced garbage stocks. Traders tend to gravitate toward these names during the thin trading around Thanksgiving and I'm already seeing action in some of them. There isn't much good action for traders in the broader market, so they are focusing on these names. Some of the names I'm watching include New Energy (NEWN), Sprott (SILU), NF Energy (NFEC), WSP Holdings (WH), Swisher Hygiene (SWSH), Recon (RCON), Lakes Entertainment (LACO), China HGS (HGSH), Mer Telemanagement (MTSL), Cleantech (CLNT), Halcon (HK) and Noah Holdings (NOAH).

These plays are extremely dangerous and have to be managed very closely, but they have a tendency to move very fast and very big.

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