We had a very volatile trading day on Wednesday. The Dow went up at the opening bell but lost its steam a couple hours later. After the Fed’s announcement, the index shot up to over 100 points, only to see it came back barely breaking even for the day. On the outset, I personally did not consider Fed’s decision to hold back rate hike a big deal to anyone. Hence, I found the surge in reaction to the announcement a reflection of a spur of emotion and technical response to oversold market than real change of economic or market reality. I shot my computer and went to bed, giving up on effort to try figuring out what happened. After all, I have closed up most of the positions.

Upon checking the market after it had closed, I was surprised to see that it had retraced to breakeven from a high of over 100 points. This is a sign of bearishness. Usually, this is a signal for poor opening for the following day. So, we shall see what will happen later. If the Dow breaks the support of 11700-800 area with a long red bar in high volume, it opens a new level of low point since January this year. The bottom has yet to be seen. Something big can happen in these couple of days. We will study the action when it appears.

Anyway, the market is full doom and gloom. As traders, we don’t have to be. We just go with the market trend, that’s all. Meanwhile, I have one stock you may want to look at when the market opens: Research in Motion (RIMM). It should open with a gap down by at least 10 points for almost 9%. It will be both Dropping and Breakout signals. Consider getting some puts for it.

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

S&P behaved similarly as the Dow. But I have a target for it, unlike the Dow which is finding new low. Shorting this index is attractive.

The Nasdaq is a strange index. It is still steadfastly holding on to its bullish chart, although it looks likely to be changed to one that is bearish. Unlike other index, if it breaks the support, it has a lot of room to go. Yes, I also mean we have a lot of money to make on this one. Technically the chart is still bullish, but the resistance at around 1960 is VERY strong due to the 20-, 50-, and 200-day MA convergence. So, we can really bet on the down side. There is one option strategy I can recommend here: Calendar spread at 1925 or a ratio put backspread.

STOCKS TO WATCH:
CME for trampoline and gap closing
RIMM for bearish breakout.

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