Market Wiggles Early After Big Drop

Pre-market futures are running along the flat-line this morning after the immense sell-off yesterday. The market is due for a consolidation - for at least a few hours - after the sharp price action yesterday. There are no substantial catalysts today, although earnings from AMAT and CS will get some news. Tomorrow will bring two economic reports, Weekly Jobless and Retail Sales, with the latter probably getting more attention than it should from the news.

Yesterday's price action on the SPX played out right to the support area that I drew for you in the 825 area. This morning the SPX is due for a test of the 835 area and perhaps a double-move back to the 840 area.

Here is a chart of the SPX:
(click on image to enlarge)

Here is a chart of the Dow:
(click on image to enlarge)

I am looking at a wiggle today as another put buying opportunity. A move above 8,100 on the Dow would be a drop dead area that ends the puts swing. If the Dow does roll back down and drop through short-term support then I expect the first pause at 7,750.

The Dow is at risk for a drop back down to the 7,500 area, at which point I expect a "lecture" from a political leader of the bailout that goes along the line of "stock market investors and fund managers need to stand shoulder to shoulder with us in preserving the financial system etc. etc." Translated that will mean, buy stocks even though you think they are going down because it's your patriotic duty to protect the economy.

I'm brining up the possibility because if we do get an implosion down to 7,500 you need to be aware that it has been the m.o. of the government to throw a news bogey at the market every time it looks like we will get a catastrophic sell-off. That means if you are playing puts and we do get a sharp drop, be ready for the possibility of a news bogey designed to stop the selling in its tracks. One other thing, keep comments - if you have any - regarding the possibility I've just outlined above fairly benign, I don't wan't to turn things into a political discussion here, I just want to keep you prepared for catalysts that can affect your trading.