9:00am (EST)
The bears continued their assault on the next wave of support as they extended their rally to 5-straight sessions. Although there was as light bid under the market that held for much of the day, it disappeared in the final hour of trading.
The Dow dipped 44 points, or 0.3%, to close at 13,413. We have mentioned 13,350 as the next wave of support and yesterday’s low was 13.406. The high was 13,480 as prior support at 13,500 has now become near-term resistance. A move below 13,350 could get 13,250 here, quickly.
The S&P 500 gave back 8 points, or 0.6%, to settle at 1,433. The low for the day came in at 1,430 leaving the bears within spitting distance of our 1,425 target. A breech below this level gets 1,400 in play. The bulls will attempt to keep 1,450 in play but it is becoming an uphill battle.
The Nasdaq declined 24 points, or 0.8%, to finish at 3,093. Tech slipped just below our 3,100 support target which now gets 3,050 in play. This, along with 1,400 on the S&P, were major battle grounds back in August and into early September before the bulls ran wild.
The Russell 2000 fell 5 points, or 0.6%, and went out at 833.93. The small-caps tested 831 and 830 held but a break below this level gets 820 in play. The S&P 500 Volatility Index ($VIX, 16.81, up 1.38) jumped another 9%. The VIX traded up to 17.08 and we warned coming into the week that on a move above the 15 level, 17.50 could be tested. From there, a trip to 20 on some nastiness could be in the mix.
We closed another winning trade yesterday for a nice double-digit profit which has given us a recent streak of 17-out-of-19 winners since mid-August. This includes 3 triple digits winners:
+193% on WellPoint (WLP) put options in 9 days
+113% on Monster Beverage (MNST) put options 8 days
+160% on Green Mountain Coffee Roasters (GMCR) call options in 24 hours
We also had 4 winners that have produced 50+% in a short period of time.
We do realize, however, that the market could become choppy in October which isn’t always the best environment to trade in, but we do believe next month will give us the clues on how the rest of the year plays out.
We will cover more of this over the weekend but for now let’s roll with what the market is giving us. We may have action to take this morning on a few of our current trades as we look to lock-in profits as well as NEW TRADES. We have some low hanging fruit on our Watch List that could be ripe for the picking.
Futures are showing a nice rebound today and look like this as we head to press: Dow (+58); S&P 500 (+7), Nasdaq (+9). The bulls will need to hold their gains today to trip the recent trend.
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