Good Friday all. We've got a real market mess on our hands, eh? I can't remember the last time we had such a divergence in the markets with respect to economic data, corporate earnings, uncertainty surrounding Fed policy and global economic visibility. It's the theory of entropy. Chaos at its best. What a freaking disaster. It appears we've got all of the above going in ten different directions. All while the markets continue to hunt for some semblance of a bottom. This morning, the headlines were consumer sentiment rose to its highest levels in five years and wholesale inventories rose to their highest levels in nine months - such rosy data. The markets could care less. That's living proof the markets trade based on what's going to happen and not what has happened. In other words, the indexes have already previously rewarded today's lagging economic data, months ago. The silver lining at this point is the long-term charts still suggest that at some point there's still room for upside ahead. If you have a look at the monthly charts of all of the major indexes, the recent selloff is nothing but just that, a normal pullback in a market that has been trending higher ever since the spring of '09. Have a look at this monthly chart of the S&P 500 here. As you can see, we've managed to maintain important moving averages over the course of the last three years. As a matter of fact, the SPX here has simply pulled back to its 3X3 DMA this month, that's it. A modest pullback in a long-term bullish market. Doesn't feel like it though does it? Another point to the long-term bullish argument is that stocks tend to run to new highs if they're actually going to implode for the long haul. Look at this very long-term monthly chart of the SPX. See what I mean? Usually, when the markets are going to implode, nobody typically ever sees it coming unless you're an extremely savvy chart technician or an economic genius, and even then, how many economic geniuses have eaten crow over the years? When there's dancing in the streets and everyone's running around cocktail parties bragging about the wonderful returns they've been experiencing, that's when everything tends to go to hell in a hand basket. As you know, that's not the case right now. We've got blood in the streets, uncertainty at every turn and a very shaky belief from investors that anything good can come from all of this. Well, my experience tells me this is the perfect environment to be resilient and opportunistic. In a weak market, you've got to continue to be opportunistic. Good stock pickers and flexible thinking are always rewarded whereas the majority of investors will only tend to do well when everything is doing well. Yesterday's edition was extremely important for short-term traders and even long-term investors. Finding bottoms, even if they're only short-term can be very profitable if you're willing to get long some index options for a few days or even a few weeks, but you've got to know what you're looking for. When the markets are in a downward trend, even if it's only a bearish short-term trend in a long-term bullish market, there's plenty of money to be made shorting the rallies and covering on the selloffs. There's plenty of ways to make money in every market, so don't lock yourself into just one strategy. Right now, as weakness in the markets continues to plague individual ideas due to the uncertainty surrounding our deficit and lending policies, it might be prudent to hunt down those companies that are short on cash and have ran too much over the last few years. Companies short on cash may have a very difficult time performing in the coming quarters ahead. However, if you're going to play those ideas to the downside, the best way would be to purchase put options at least a few months out. I'm not a fan of actually straight shorting stocks because you're exposed to an unlimited loss of your money in the event you're wrong, but with options, you can determine exactly what you're willing to lose in the event you are wrong, but you can still generate very handsome returns in the event you're right. Other ways to exploit profits in short-term bearish trends is to consider certain inverse ETF's that will yield nice returns in a downward trending market. We had a reader the other day inquire about the UltraShort Dow30 ProShares (DXD). The DXD's seek daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the Dow Jones Industrial Average SM. The fund invests in derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as two times the inverse (-2x) of the daily return of the index. The index is a price-weighted index maintained by editors of The Wall Street Journal. The index includes 30 large-cap & blue-chip U.S. stocks, excluding utility and transportation companies. The fund is non-diversified. If you want to learn more about the DXD's, go here. Basically, you're betting the market goes down. I've included a daily chart of the DXD here for your review. As you can see here, it has performed well as a result of a weakening market. However, there's a few key things to remember about playing leveraged ETF's. First, many investors don't realize that just like options, they erode with time. In other words, if the markets did absolutely nothing but trade sideways for weeks, the DXD's would actually go down in value. Secondly, if you're going to play a leveraged inverse ETF, don't jump in when the markets are at lows. Jump in when the markets are experiencing relief rallies and pick logical entries where you believe the index or sector in question is going to resume its downtrend. Do NOT enter into those ideas after the markets have sold off for three days in a row. Wait until the market has exhausted itself to the downside, rallies for a few days and then consider an entry point. Let me just reiterate, in an environment like we have right now, if you want to get long an idea, don't do it until you have some sort of signal or a significant context for the idea that a potential bottom is in place. Conversely, if you're going to trade the trend to the downside, wait until the market pops a bit before jumping in. As we've seen all year, if you don't like today's price, just wait until tomorrow. I suspect we're very close to some sort of tradable bottom. We'll go over Monday exactly where the indexes are now. I picked up some call options on the QQQ's on yesterday's close, but won't likely be hanging on to them long. Just a quick flip for some short-term returns. We got so much positive feedback last week regarding my son's NFL prowess for picking winners against the spread that I had to ping him again this week to see what he could provide. In short, he said this week is a tough week (guess that's the theme across the board), the spreads are not favorable to any real locks except for taking the Detroit Lions against the Vikings. He also said playing some teasers and getting the extra points may be the best play using the Patriots, Steelers, Lions, Broncos and Chargers in some sort of teaser combos. Let's see how he fairs this week. Just a little fun aside from the meltdown we've all had to observe this week in the markets. It's been a long week chalk full of news, however, come next week, things can change on a dime. If the indexes find a bottom, you'll likely hear the media reverse all of their negative sentiment and give you something to be hopeful for. Let's stay focused and not fall into the media trap so many are accustomed to. Like I said earlier in the week, it would be a far bigger surprise to hear the fiscal cliff is going to get resolved, so if and when that takes place, it will be worth a lot of points in the markets.