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Play Editor's Note: Isn't it amazing at how much the short-sale ban on financials has "protected" the financial sector. The ban was enacted on option expiration Friday in September and the financials screamed higher on the news. From the Thursday, September 18th close the XLF is down 20%. From the Friday, September 19th close the XLF is down almost 29% and sitting at new all-time lows. One argument is how bad would the selling have been without the ban? Currently the ban is due to expire midnight tomorrow (Wednesday) and some have suggested that financials were down sharply today as investors exited ahead of the ban expiration.

The Dow Jones Industrial Average has given up almost 1,400 points in the last four days. The S&P 500 is down more than 14% in the last four days. The NASDAQ Composite is down almost 16% in the last five days. These numbers are a lot worse if you look at the last seven weeks. The point I want to make is that we're severely oversold and way overdue for some sort of relief (bear-market) rally. This is probably not the time to be opening new short positions - at least not with the VIX over 50.

Tonight's watch list has a few selected stocks where I posed the question, "what if the selling keeps going from here... where would these stocks find support?" These would be support levels where I'd be tempted to buy these stocks but with tight stop losses.

MSFT: This software titan got crushed for a 6.7% loss today and a new two-year closing low. Essentially MSFT is testing support near $23.00 right now. If the selling continues, I'd be tempted to buy a dip near $22.00 with a stop loss under the 2006 low of $21.45.

PETM: Personally I think PETM might struggle in a recession as consumers cut back on luxuries for their pets. Technically, a dip back toward the $19.00-18.75 zone could be a test of support and a nice spot to bet on a bounce with a tight stop.

CSCO: This is another tech giant that is getting crushed as investors worry about the impact of an economic slowdown. A dip to the $17.25-17.00 zone might be a bullish entry point with a stop loss under $16.80.

New Long Plays

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New Short Plays

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