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Bears Flex Muscles

Bears Flex Muscles

9:00am (EST)

The bears are pushing the 50-day MA's (moving averages) and the July lows but we mentioned yesterday the indexes are still in a trading range. There could be a little more downside action if there is not a rebound today but the bulls still have some wiggle room before we would push the panic button.

Of course, if there is a continued pullback, DON'T be nervous to play a market correction because you can make just as much money shorting stocks and the market as you can to the upside.

The Dow dropped 225 points, or 1.5%, to settle at 15,112 on Thursday. The blue-chips traded to a low of 15,094 and the close below 15,200 gets 15,000-14,800 in play. A close back above this level would stop the bleeding heading into next week.

The S&P 500 fell 24 points, or 1.4%, to end at 1,661. The break below 1,675 was nasty and we said it could lead to 1,650. Yesterday's low checked-in at 1,658. A close below 1,650 could lead to 1,625-1,600 and where we would expect buyers to come in if there is no rebound today.

The Nasdaq declined 63 points, or 1.7%, to finish at 3,606. We mentioned a close below 3,675 would get 3,625-3,600 and yesterday's low was 3,600.96. There is risk down to 3,550-3,500 on continued weakness while a close back above 3,650 would provide some stability for the bulls.

The Russell 2000 tanked 20 points, or 1.9%, to close at 1,027. We have warned that a break below 1,040 would be bearish for a possible dip to 1,025-1,000 and Thursday's low was 1,026. The bulls would love to get the index back above prior support but there could be further downside action before a bottom is in.

The S&P Volatility Index ($VIX, 14.73, up 1.69) surged 13% on the market's slide and closed above 13.50 but not 15. If you flinched, punch yourself twice because we said not to until 15 cracks. Thursday's peak was 14.85. Now that the VIX is near 15, we can prepare for a possible run to 20 but needs to be confirmed with a close above 15 today.

As we head to press, futures look like so: Dow (+14); S&P 500 (+3); Nasdaq 100 (+7).

We got some great news after the close on Thursday and it's been a sweet week so let's go see where things are at with our current option trades. Subscribers, check the Members Area for the updates.