3 Stocks to Sell for the Next Leg Down

The market looks like a boxer getting pummeled by his opponent. It continues to
absorb blow after blow, but its still standing. But how long we have to go
before it falls and the referee ends the bout is anyones guess. When we first
started down in July, the selling had all of the earmarks of a panic. It was no
surprise, then, that we were able to bounce off the lows and recover fairly
strongly. Unfortunately, it wasn't meant to last. Last week we endured another
round of selling, but something was different with this go-around. I believe we
are witnessing a self-fulfilling prophecy. The market clearly is signaling that
a double-dip recession is in the cards despite there being no evidence of such
an economic decline. Unfortunately, the economic recovery is fragile, and all
this selling is making people nervous. Homebuyers are spooked by market
volatility , and consumers, just as frightened, are likely to curtail spending.
It is that fact that has me very concerned given the dependence on the consumer.
With slow economic growth, corporate profits were likely to continue growing. A
strong case for stocks rallying from here would make sense. The problem for
investors today is that during a recession, profits are likely to shrink. At the
moment, Wall Street analysts have been slow to discount future forecasts of
earnings. With a disconnect on Wall Street between economists forecasting slow
growth and analysts projecting that all is well with corporate profits, the
market could be in for another leg lower. Even if we avoid the double dip,
analyst projections need to adjust lower. Given the market's reliance on
pricing stocks based on future expected cash flow, these forthcoming analyst
adjustments sets up the market for another beating. One of the stocks I follow,
ValueVision (NASDAQ: VVTV ) lost 30% of its value last week after reporting
results that missed expectations. That loss was after the stock was already
down. Clearly there is risk at the moment, and not just panic risk. Here are
three stocks to sell for the next trip down: Hewlett-Packard The hubris of
corporate management is alive and well. When Hewlett-Packard (NYSE: HPQ )
announced last week that it would be reorganizing, I knew immediately that
something was amiss. Shares initially rallied on the news, creating a wonderful
shorting opportunity. When management tries to create value with gimmicks
instead of innovation, investors should run for the hills. Sure enough, HPQ lost
20% of its value the very next day. It is not too late to sell. Management
already is throwing in the towel by exiting the tablet computer space. We have
heard this story before. Most recently, investors could sell short Palm and
Research in Motion (NASDAQ: RIMM ) after an initial decline and profit
handsomely. If things get worse economically, HPQ is likely to hit single digits
before this ends. I would sell this stock ASAP.