HERE WE GO

It looks like we got some of the confirmation that we were looking for. The market closed on its lows today, and we got a decent spike out of the VIX. We also started to break below some key support levels. The Dow closed below its 100 and 200 day MA. The Nasdaq closed below its 50 and 200 day MA. The S&P 500 closed right at its 50 day MA, but it will likely drop below it tomorrow. The S&P 500 futures broke their 50 day MA after the market closed, so I'm assuming the index will follow tomorrow. If the S&P 500 drops below 1088 (July 30th low), my next target would be that magical 1040 area again (although we could get a bump around 1060). With the negative news from Cisco and the current selling in Asia at the time of this posting, the market could gap down again tomorrow at the open. If it does, you might want to wait a bit before buying your puts. If we gap down, I think we would likely rally back up a bit...perhaps up to today's closing price. That would give you a better entry. If we open at today's closing price or if the market gaps up at the open, I think you can buy your puts right away. A nice tight stop would be above today's opening price. If we move up tomorrow and wipe out today's move down, you will want to be stopped out of the trade. Let me repeat that...If we move up tomorrow and wipe out today's move down, you will want to be stopped out of the trade. That goes for about every individual stock that had a big move down today. I don't recommend getting overly aggressive here. There are still plenty of traders out there that are looking at this as a buying opportunity. We could get a small bounce or even move sideways for a few days. Buy in-the-money options with a delta close to .70. Although I expect a possible big move down, the ITM options are still the safest way to play the expected move. Make sure you have a plan to take profits off of the table. Even though I give you target expectations for these moves, it doesn't mean that you don't take profits along the way. I like put option trades on SPY, DIA, and especially QQQQ. I still have puts on IBM and AAPL. I've got calls on FAZ (which is actually a bearish trade on the financials). I like puts on AMZN (although it is a riskier trade since it is still above its 50 day MA). I hate to say this, but I like puts on AXP...I won't trade it because I got stopped out twice before, but it could get down to at least $37 if we have another big move down in the market. I like puts on NEM. I like puts on CSCO, but it might end up gapping down to around $22 after their earnings announcement today. If it does, don't chase it. Wait to see if you get a bounce. From the Dow Industrial Average, I like puts on AA, BA, DIS, HD, IBM, JPM, MMM, and XOM. There are many other bearish looking patterns out there, but there are also some bullish ones. I haven't listed any bullish patterns because I think that the market could continue to sell off tomorrow or Friday. If it goes up instead, I'll list some of those bullish patterns. Let me be clear, I don't expect you to trade all of these patterns. Look over them yourself and see which ones you like. I expect you to apply the trade management techniques that I taught you in the course and to use proper money management. The money is not made in the stock pick. It is made on how well you manage the trade and how well you manage your risk. For those that have not yet learned about trade management, you can protect your trades using a simple 50% stop loss. Once you lose half of the amount you spent on the trade, you get out. You can use some of the previous lows as possible profit targets. If you have any questions, please e-mail me or ask me in class. Don't get overly aggressive here. If the market is on a new trend lower, we could have several opportunities over the next few months.