Top Stocks For 2011, Best Stock Investments For 2011, Hot Stocks For 2011

As you know from watching Viral Investing: Turning Market Chaos Into Cash, I have been predicting a sizable downturn in American top stocks for 2011. The depressants are manifold, not the least of which is the onset of the next leg of the "Great Recession" that began in 2007.

But more important than any singular piece of information is the way in which investors understand and act on available data. And the rate and fashion of memetic uptake is cyclic and predictable.

WaveStrength attempts to combine both sides of the equation. It establishes large groups of investors' predisposing cyclic framework, and then tracks the pool of existing information as it enters that framework.

Right now, the central bundle of memes that I have been tracking could be labeled as "Investors' Lost Faith." The core idea is that most every investor out there has known for months that this last bullish cycle would end in the same fashion as the previous two.

However, anticipation of a third massive crash has accelerated the rate at which we would arrive at the next crisis. Indeed, I believe that we are already past that critical point.

Now you need to defend yourself from this collapse. Here's how you might start:

You can actually short the market in the exact same fashion as you might go long, by buying shares of a bearish ETF like ProShares Short S&P 500 (SH:NYSE), which gains roughly 95 cents for every dollar the market falls.

Another slightly more focused vehicle that should interest you would be ProShares Short Dow 30 Fund (DOG:NYSE), which aims to gain 95 cents for every dollar the Dow Industrials peels away.

You might amplify that gain by purchasing shares of ProShares UltraShort Dow 30 Fund (DXD:NYSE), which attempts to double up the gains offered by their "1X" fund, in essence bringing in a buck 90 or so for every dollar lost on the Dow.

Both these funds achieve much of their aims with select puts against various Dow ETFs and their constituent top stocks for 2011.

This is also a tactic that I vigorously pursue.

Three Option Tactics

Today the markets are as volatile and odd as I have ever seen them. One minute the market is discounting quarterly profits and peeling off 4%, 5%, even 6%. In fact, over the past few weeks, we have seen the market sell off on strong earnings reports just as often as they have accepted them as a reason to buy.

The next, top stocks for 2011 are trading up hundreds of points on phony government projections that can't possibly work. (As I sit to write to you today, I have a report out of Washington that claims in its headline that new home sales are "up" 24%. But when you break down the numbers, you find that they only got that figure by secretly downgrading the previous month. In fact, this headline disguises the worst June IN HISTORY!)

That's just a sample of the whipsawing and fog we have to deal with these days. If you want to survive, you have to look past the "reasons" for all these jumps and dips, and see them for what they are: the herd's wavelike cyclic processing of preexisting memes.

Here are three long-term option plays that look to take advantage of these waves.

No. 1: The Long Gold Bullish Wave

As I mentioned in my video, I anticipate that Washington will continue to pump dollars into the system in a Keynesian attempt to forestall a double-dip recession. While physical gold does offer some protection against dollar destruction, you can actually convert interest in gold into a dynamic leveraged asset via calls against the SPDR Gold Trust (GLD:NYSE).

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As you can see, the GDL is in the midst of a long rising wave that has already raised its price more than 50% since October 2008. However, price has recently fallen within the context of that long wave.

The next mid-term rising cycle should move GLD's share price through the midpoint of the long wave at $129.80 (+12.08%) and on to the wave's three-quarter line at $141.36 (+22.06%).

As I sit to write this report, GLD December 115 Calls (GLD1018L115) are trading for $6.65 with a posted delta of 0.6091.

My initial predicted move to GLD $129.80 should raise these calls as high as $15.17, for gains of 128.14%. Should we see the follow-on move to GLD $141.36, these calls might even hit $22.21 for a total gain of 234.02%.

I will be using today's price as a peg for future calculations. With that in mind, I recommend that you set an initial 40% trailing stop at $3.99. Don't forget to move this percentage-based stop up with each ensuing high.

No. 2: The Long Blue Chip Bearish Wave

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Here is a chart for the iShares S&P 100 Index ETF (OEF:NYSE). This ETF trades against the blue chips of the S&P 100 (OEX) in the same fashion as the Diamond Trust (DIA) works to the Dow 30 and the QQQQ plays on the Nasdaq.

As you can see, the mid-term contrarian bull cycle has just come to an end. Now the blue chips are once again moving in the same general direction as the overall long-term trend. Indeed, as price is currently well above that long-trend's mid point, we should see the rather dramatic downside corrections we have been experiencing continue with a vengeance.

I recommend purchasing OEF December 50 Puts (OEF1018X50), currently trading for $2.90 with a posted delta of 0.4138.

My predicted move to OEF $40.78 should raise these calls as high as $6.88, for gains of 137.12%.

Once again, I will be using today's price as a peg for future calculations. With that in mind, I recommend that you set an initial 40% trailing stop at $1.74. Don't forget to move this percentage-based stop up with each ensuing high.

No. 3: The Long Retail Bearish Wave

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Finally, we are looking at a chart for the Consumer Staples Select Sector SPDR (ETF) (XLP:NYSE). This ETF represents our country's entire grocery supply chain.

Once again, the mid-term contrarian bull cycle has come to an end. Now these purveyors of diapers and potato chips are all moving in the same general direction as the failing long-term trend. And we can expect the same the dramatic downside corrections.

I recommend purchasing XLP December 27 Puts (XLP1018X27), currently trading for $1.43 with a posted delta of 0.4006.

A 14% drop to XLP $23.38 should raise these calls as high as $2.97 for gains of 107.57%.

I will be using today's price as a peg for future calculations. With that in mind, I recommend that you set an initial 40% trailing stop at $0.85. And as always, don't forget to move this percentage-based stop up with each ensuing high.