BREAKING SUPPORT

The Dow became the last major index to close below its 50 day MA. This shows that the sellers are clearly getting control of this market. Everything seems to be in place for another big move down...except for confirmation from the VIX. I would still like to see the VIX spike up to around the $31 to $32 area. Until this happens, the market would likely move more sideways...or even rally a bit. There hasn't been any panic selling as the different market indexes have dropped below their key support areas. Until the panic kicks in, I don't see the sellers getting too aggressive with their short positions. Last week I said that the selling should start if the Dow closes below its 50 day MA. That would mean that a bigger move down should start tomorrow. If the Dow rallies back above that moving average tomorrow, we might have to wait until it drops below it again before the sellers get more confident.

Here are some bearish patterns that could be nice put option trades. Use February options since they are now available: GLD, SLV, CF, BIDU, WYNN, LVS, MS, JBLU (with a stop above today's high), BAC, JPM, CVX, DD, IBM, MSFT, and PFE (both with a stop above today's high). I don't expect you to trade all of these patterns. I don't want you to get overly aggressive on your bearish trades...at least not yet. You can look at some of these potential trades and apply what you have learned in the course. Set up stop loss and profit targets, calculate your reward to risk, and set up a money management plan. Keep in mind that the last two weeks of the year tend to be flat to slightly bullish. This could allow for the markets to have a short term bounce before heading lower. That said...since so many traders out there are expecting the markets to fall after the end of the year, we might just get that drop a week early. For those that want to be more cautious, you could wait a few more days if the markets start to rally a bit. You might even be able to get a better entry price.

Some call option trades that would take advantage of a bearish move in the market would include FAZ, TZA, and TLT.