The bottom of the Dow was finally hit on Tuesday. This 11800 level is the key support. A rebound can be expected. Any crash below 11800 spells disaster to the financial markets. More crashes would follow. The markets have to decide what to do now. Coincidentally, the Fed’s FOMC falls on Wednesday. This could be the trigger to what will come next.

I am not so much interested in speculating the likely turn of event. I would wait for the market to lead me. Well, if I have to guess, I think it should be bearish. The market has very much expected the Fed to keep the rate unchanged. Further rate cut is out of the question. That means good news is ruled out. Rate increase would only exacerbate the already bad economy and spook the stock markets. There is nothing else positive to talk about. Given the influx of bad news (yes I mean it), we can really foretell the imminence of a big financial storm.

For the Dow, I am looking at the break of support. This will signal an entry window. You may short the index or long the put options. Similarly, you may buy up put options on any stock that break the support just as the Dow would do. However, do watch out for false breakout. The market is ready for a rebound with the slightest positive news. Just keep that in mind so that you won’t be caught off guard when it happens.

If you have doubt or not buying anything, try to sell Bear Calls. Plenty of it.

As I mentioned before, the S&P ($SPX) chart is not too oversold. It has more room to go than the Dow. The target support is 1270.

Technically, the Nasdaq chart is still bullish. It has to break the RSI 40 line to make it bearish, which is highly probable. This is because the Russell 2000 (RUT) had just broken its support line yesterday, leaving Nasdaq the only index bullish. The strength of bearish momentum can pull the index into bearish territory, which is a trading signal.

STOCKS TO WATCH:
CME for trampoline and gap closing

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