Hope you all had a great weekend. If you're a horse racing fan, our Kentucky Oaks and Kentucky Derby picks we gave you on Friday were close but no cigar. Yea I know, close only counts in horseshoes, no pun intended. Two out of three of our Oaks picks ran 3rd and 4th while two out of three of our Derby picks ran 2nd and 4th. Respectable to say the least but not good enough. What makes it even more frustrating is I had insider info that "I'll Have Another" was going to run a big race on Saturday but just didn't choose to believe the source. Guess I've got a little egg on my face because right after he won the Derby on Saturday, my first thought was... wow, I'll have another. Oh well, next year! Advertisement 3 Profitable Dividend Plays to Buy Now Chief Investment Strategist Alexander Green reveals why dividends are still your best friend. Discover the three most profitable high-dividend stocks to buy right now. Claim your free report here. Advertisement On to much more important things. Thank God we're much better at the market than horses as Friday's market meltdown inevitably proved our analysis over the last month or so spot on. The NDX along with the other major indexes gravitated to that April 24th low, taking it out while now doing its best to find a base. A relief rally would be in order now as Friday's move was likely a little over-extended on a very short-term basis. However, if this market does decide to rally a bit from here, don't get suckered into thinking the selloff is over. It's way too soon to start thinking this market has bottomed. We're going to need to see a number of things happen over the next while before we'll be convinced the market has finally found a bottom. Of course, we publish every day so we'll continue to keep you updated on what we think is on the horizon for the major indexes. If this market does decide to snapback here, pick your spots and fade the rally with index put options. Until proven otherwise don't try and fight the current bearish trend, go with it and make some money. One of the big questions that comes into play when the markets start to turn for the worse is how I do make money in a bear market? The bad news is it's not easy, the good news is it's possible. A Patient Investor's Strategy in a Down Market If you're more of a patient investor who doesn't flinch from month-to-month just because the market goes up or down, there's a number of things you can do to try and hedge against your long positions and even position yourself properly for when the markets turn for the better. One of the best things you can do in my opinion is exactly what we've been suggesting all along in our daily editions ever since this market started to go south back in early April, buy index put options a few months out when the market rallies and cover them up when the market moves down hard. It's important to remember you never really want to hang on to options too long unless you're way in the money but this strategy can provide some excellent returns to help offset the losses being incurred in your long term holdings. Another good strategy is to sell fairly out of the money call options against your long term holdings. This can be a little tricky but let's assume for a second whatever stock you own doesn't move much in general. There's a good chance in this case if you sell call options that are fairly out of the money, there's a good possibility the call options you sell will expire worthless to the holder, which provides you with basically free money and allows you to keep your stock. Of course, this only works in the event there's an options market for the stock. If for some reason there's no options market for the stock you own, then averaging down in the stock you own isn't always a bad idea. However, you must absolutely love the fundamentals and long term growth opportunity that the stock represents. Just my two cents here, but never ever average down too much on speculative ideas. That can end up being a huge mistake because if the economic undertone is the catalyst for the market moving lower, speculative ideas can often never make it back from a worsening economy. Make sure if you're going to average down on an idea that the Company is well enough capitalized and positioned properly to weather the storm. If you eliminate the noise from the media, a bad market is like a blue light special. Individual stocks move south in sentiment so it's most definitely a good time to go hunting and find ideas that you think nothing has changed materially with the company other than its stock price because the rest of the market is moving south. It's basically a poorly advertised sale for stocks. Look for solid companies with solid fundamentals and don't be scared. If you're in the market for the long haul, the market will come back, it always does unless you think it's the end of the world and stocks would likely be the last thing we'd all be thinking about. It's also not a bad time to cut those losers and underperformers that weren't going up when the market was doing well. Find those ideas that were performing well when the market was and reposition some of your portfolio. Everyone needs a haircut at some point so don't be afraid to groom your portfolio nicely in a bad market. Then, there's always the opportunity to short a stock you absolutely think is overvalued. This is a great strategy in a down market because you're trading with the current. I would never suggest anyone go out and simply short a stock straight. What I mean is if you want to short something, minimize your exposure by buying put options in the stock. If you straight short a stock, your downside is unlimited. However, by purchasing puts in a stock, you know exactly what your downside exposure is. Look for Small Stocks Bucking the Trend This is my favorite strategy in a bad market. I've said this before but in case you missed it, there's something very dynamic that happens when a small stock starts to gather steam to the upside in a down market. As a matter of fact, my observations over the years have clearly taught me that small stocks are an excellent place to play when the market turns south. I'm not insinuating you need to run around and jump into every stock that is going up in a down market. What I am suggesting is you should keep your eyes peeled for ideas that are showing exceptionally strong signs of positive volume with price appreciation to go with it. I think what tends to happen in a bad market is there aren't many green ideas on everyone's screens, so everyone and their mother start to gravitate to the few ideas that are. This actually can provide an even better catalyst for a specific idea that would likely never have occurred in a good market. Because everyone is typically hunting for stocks they can buy, the few that are green end up attracting even more buyers than it would have in a good market environment. Look at our recent idea, LuxeYard (LUXR)? The stock has become a trader's dream. It has continued to buck the trend of the major indexes for weeks now and it appears more and more investors and traders are finding out about it. A perfect example of what I'm referring to. Advertisement The ONE Event in 2012 that Could Derail Obama A prominent financial journalist says that a single event -- which is likely to take place in the next year -- could soon transform America, overnight. He says this event could also destroy Obama's hopes of getting re-elected. And he says this controversial event will be the most important financial story of 2012 -- yet almost no one is paying attention to it right now. Get the important facts here... Advertisement Biotechs often tend to do well when the market is going south because it's the ultimate space for speculation. Since fundamentals and financials don't seem to be as important as the promise or the story for biotechs, investors tend to start playing them more when the rest of the market isn't cooperating. This makes sense since again, everyone is looking for somewhere to play. The bottom line is speculative ideas can be excellent ways to make money in a bad market, you just have to be on the lookout and not get married to them unless you love their fundamental prospects as well. I also believe it's much more important to be a buyer of good ideas in a bad market than it is to be a buyer of good ideas in a good market. Pick your spots, keep a short leash on your speculative plays and invest in good companies for the long haul. I suspect your kids will thank you when it's time for college.