Something wicked this way comes?

After last week’s market performance, the current trend analysis of the major indices merely confirms the obvious – that the market is now in a clear downtrend. And despite the fact that the market could be said to be once again short-term oversold, and the S&P500 is (for now) still holding above the 1190 level, I don’t see any reason right now to assume that the decline is over.

If that’s the case – that there’s probably more to come – then a look at the next lower levels of support on the indices may offer a clue as to what could be next: S&P500 (1150-1160), NASDAQ (~2000), Dow Jones Industrials (9700-9800), and the Russell 2000 (~610). A drop to these levels would represent an additional decline of about 5% (with, of course, no guarantee that it would stop there).

Last week’s sell-off triggered a couple of new put sales, even as I began pulling back somewhat on placing limit orders and lowered many of my downside stock price targets in the face of what appeared to be confirmation of an intermediate-term market downtrend. On Monday I sold some November 60 puts in Exxon (XOM), and on Wednesday I sold some October 25 puts in General Motors (GM).

I made a mistake with the XOM puts, accidentally selling them at a price I had calculated for October puts, which means I sold them earlier – and at a higher stock price – than I had originally intended. My only concern here is not the possibility of being put XOM – despite the recent sharp sell-off, oil/gas stocks are still one of the strongest-looking sectors longer term – but the lower return I’ll get from the reduced option premium.

My current watchlists reflect changes to many downside price targets, as well as a few additions and deletions. For example, I removed contract drillers Pride International (PDE) and Tidewater (TDW), and electric utility FPL Group (FPL) from my “upside momentum” watchlist because technically they’re showing price reversals on a weekly basis – that is, the week before last they closed at or near a high on a strong move up, but then reversed that move last week, closing the week down near the low of the previous week.

The following selected stocks are currently demonstrating short- and/or intermediate-term strength:

My watchlist of beaten-down stocks has – not surprisingly – changed somewhat as well:

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