1120

We are back to watching the 1120 area on the S&P 500. If we break below this level, we will likely continue the move down towards 1040. The S&P 500 has either opened trading near 1120 or closed trading near 1120 for 6 of the last 11 trading days. This makes that area pretty significant. With the market down pretty big over the last week, we could get a short term bounce in the near term. I bought some puts at the close today in case we break below 1120 tomorrow. If we do end up rallying up a bit, I will look to add more contracts. Although I am expecting the market to move down a lot further in the longer term, we could start to get some choppy trading ranges in the intermediate term that could decrease some of the volatility. I don't expect to see much sideways price action until we get down close to that 1040 area, but be aware that it could happen. You need to use good money management in these types of markets. You can make money very quickly when the volatility is high, but you can also lose it very quickly. The Dow Transportation Index has already broken below its August 9th low. The Dow Transportation Index is often considered a leading indicator of the market. Since it has already broken below this low, it makes it more probable that the major indexes will follow soon and break below their August 9th lows. If you do end up buying some put options in the next day or so, make sure you buy out to October. You want to make sure you give yourself enough time in case there is a short 3-5 day rally. Like I said last week...the shorter term movement of the market is very difficult to predict, but the longer term expectation is that the markets will continue to move lower. The financial stocks all look like they will continue to move lower. There were many bearish engulfing candlestick patterns on the financial stocks....look at GS, MS, JPM, C, BAC, WFC, etc.