MARKET COMMENTARY

Alright, we have a breakout, finally. This is a sign that the bulls are kept at bay. If the Dow breaks the last low at 11300 tonight, we can expect the market to trade in a range for an extended period. What will be the support for the range is yet to be determined. But we can take low point in mid-July as yardstick:10900.

Certainly, I don’t rule out the possibility of more bearish move beyond 10900. The Dow is not very far from this level. Hence, the possibility is great. If imminent bank bankruptcies and inflation threat are as serious as what the market players say they are, then a severe crash below 10900 is more real than imagined. For options traders, at least we can start with Bear Call and follow with Bear Put when the 10900 level is breached.

The Dow has been trading cautiously even though it is bearish. Volume is still kept at low level. During the intra-day trading for the past two days, there was no knee-jerk action that caused big sell-out. For this reason, it is possible that we can expect a mild rebound on Wednesday. Yes, the short-sellers have to take profit. This can give the market a break.

DJIA Daily Chart

The Russell fell on Wednesday. But it is facing great support from three major moving averages. As far as the chart is concerned, Russell is on a bullish trend. Look for opportunity to go long with this index.

RUT Daily Chart

Apparently, the Nasdaq has broken its 200-day moving average support. It looks set to test the 50-day moving average. This is an important support. This chart, too, is a bullish chart.

NDX Daily Chart

STOCKS TO WATCH:

Watch out for housing and financial stocks to get hit again.

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