A year ago on MLK day, the move down in the S&P that began on Sunday afternoon and continued through the close of trading that following Tuesday amounted to a 45-point range and a 45-point net drop in the S&P, which as a percentage of the opening price of just under 850 was a drop of about 5.3%. Could that be part of the reason we sold off on Friday? I don’t know, but I do beleve the psychology behind that move and others leading up to that (for example, the 103 point drop in the S&P on 9/29/2008) is probably still fresh enough in people’s minds that it could be having an impact over these holiday weekends.

With that in mind, along with the significant weakness in the market and market leaders on Friday, I’m looking more at the short side for Tuesday trading. There was weakness across the market leaders on Friday, registering many outside-down days on higher volume. Normally, that means “pay attention”. Further, the disproportionate weakness among BOTH the XLF and the SMH attracted my attention. Having said all that, we’re in earnings season now so we have to pay close attention to how the markets react to whatever the news is (so far, we’ve sold off on pretty solid results).

Here are a few ideas that I like for Tuesday. If the market is strong, I’ll lean long and will focus on the broad markets (SPY and/or SSO); if it’s weak, I’ll look for evidence that we’re going to finally shake out some who were late to buy into the rally. The three short ideas here are centered around the idea that if we start to get a meaningful move down, the stocks that are most vulnerable are those that have had significant moves up and thus are likely to have a lot of sellers. With that in mind, here are my three favorite short ideas: