8:35am (EST)

Folks, we are looking at a NASTY open this morning.

After pushing the major averages to new highs for the year, the bulls will be in trouble today as the bears looked poised for a HUGE market correction today.  We were up late checking the futures market and shortly after midnight the Dow futures we down a whopping 247 points to 10,195.  The S&P 500 futures are off by 32 to 1,076 while the Nasdaq 100 futures are lower by 54 points to 1,740.

There is news out of Dubai that shook the Asia markets and there was a heavy sell-off as investors worried about banks’ exposure to Dubai World’s debt.  Dubai World is the city state’s largest corporate entity and has asked creditors for as six-month stay on debt repayments of nearly $60 billion. 

Commodities are also trading sharply lower this morning, with oil futures down 5%. 

The stock market could easily lose 3% today and it will no doubt put a stop to the momentum the bulls have carried since March.  What will be important today is how much the bulls fight back or how hard the bears push. 

We have been bullish right along with the market but it doesn’t mean we haven’t prepared for a correction.  The major indexes pushed right through our short-term targets and we have been saying how these were meaningful support and resistance levels.

From the November 8th Weekly Wrap when the Dow was at 10,000, the Nasdaq was at 2,112 and the S&P 500 was at 1,069, here is what we said:

“Our near-term targets for the Dow remain 10,300-10,400 to the upside and 9,650 is short-term support. 

For the S&P 500…it has been struggling with 1,100 but a break above that level could lead to a run to 1,200.  Support is strong at 1,000 and even down to 970 but a break below these levels will spell trouble.  

If the Nasdaq were to breakout, a run to 2,275 could be in the cards.  Support is at 2,000-2,025 and a break below that could mean a trip to 1,800 quickly.” (END)

The near-term support levels for the Dow are 10,000 then 9,650, for the S&P it would be 1,070 and 1,000, and the Nasdaq levels to watch are 2,100 then 2,000.

The Dow closed at 10,464 on Wednesday so a 3% correction would put the Dow at 10,100.  The S&P closed at 1,110 and would be knocked down to 1,080.  The Nasdaq is at 2,176 and would fall to 2,100. 

Don’t let the shock of a market correction scare you.  We may be forced out of some of our bullish trades today but we can change sentiment on a moment’s notice.  We are not a bull or a bear.  All we want is market action and we are sure to get it from here on out. 

The thing that scares most investors away from the stock market are days like today.  Last year at this time you will notice our 2008 portfolio was heavy on the put option side as we continued to play the market’s weakness following last year’s market correction.  The point is you can make just as much money with stock options on the way down as you can on the way up.

We doubt Dubai’s financial troubles will trigger a significant global fallout but the news has made us cautious on any year-end rally.  We should get a clearer picture today and next week when Wall Street gets back from vacation.  The market is only open half a day today and will close at 1pm.

We do profile one trade that may do well should we see continued weakness.  It is a direct play on today’s news and we are trying to buy at the open.  Current subscribers, check the Members Area for the updates.

As we head to press, Dow futures are down 200 points…