Game Plan: Seller Burnout

Investors are so burned out from negative market action that not even a $50 billion Wall Street scandal or the imminent demise of one of America’s biggest companies could spark a sell-off Friday. This new trend in groupthink, Cramer said, has once bearish hedge funds reassessing their strategies.

It makes sense when you consider most people figured the Dow would drop 400 points today on news that Bernard Madoff allegedly defrauded clients of his own hedge fund through a Ponzi scheme and the Senate rejected a bailout for Detroit’s Big 3 automakers. Instead that index closed up 65 points, and the Nasdaq finished 32 points into the green.

And you can’t attribute the day’s strength solely to Treasury Secretary Henry Paulson and his willingness to use some of the TARP money to save GM. Friday’s action was more than that. It showed that “sellers have…completely and utterly exhausted themselves,” Cramer said, to the point where bad news almost no longer affects them.

Hedge funds are taking note. Shorts are being covered, and managers are changing their bias as a result. And why shouldn’t they? Despite all reasons for the contrary, the market held its ground Friday.

So Cramer’s Game Plan remains the same: Look for accidental high-yielding stocks, and those are that trading at or near their cash. Recession-resistant names work here, too. These strategies work in this environment. Just look at NYSE-Euronext, which Cramer recommended Thursday. That stock opened near $25 and closed at about $27.50. That’s a nice 6% gain.

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