CRITICAL AREA

The Dow closed the day just above its 200 day MA. The S&P 500 closed just above its 50 day MA. The Russell 2000 closed just above its 50 day MA. The Dow Transports closed just above its 50 day MA. The VIX closed right at its 200 day MA. Almost every stock that I follow closed near a support or resistance area. The only index that broke support was the Nasdaq which clearly broke its 50 day MA...and also formed a nice bearish engulfing candlestick pattern. It's been a while since I've seen such a critical area. If we break all of this support in the other indexes (the Nasdaq has already broken it), we could really start to see the selling pressure pick up. The problem lately has been the dropping VIX. That might have reversed today. The candlestick pattern on the VIX does show a possible reversal. Watch for a spike in the VIX if we drop below these key support levels. I'd like to see the VIX spike up at or above 32 before I get too aggressive again with puts. I've been burned a bit (like some of you) on the whipsaws over the last few weeks. AMZN has moved down nicely since the recommendation....as has BIDU, WYNN, CF, and SLV. I bought QQQ puts and TZA calls at the close today. I will look to add SPY and DIA puts if we break support...and possibly FAZ calls. If we rally tomorrow off these support levels, I will continue to wait.

I am planning on taking my annual end of year two weeks off. I try to use this time to get away from the market and recharge my battery. I recommend that you do the same. Most of the professionals take this time off and it's one of the only times of the year when the professional are off in unison. If the market starts making a bigger move down...and if the volume is higher than normal for the last two weeks of December, I might stay active and take the time off later. If I do decide to take the time off, I will likely not have many blog postings unless something significant happens. I will still answer a few emails, but I can't promise that they will be answered immediately. I will likely have one or two more blog posting this week before I take my break.