With the DJIA closing down 41, and the NASDAQ down 23, the big question remaining is this the beginning of a big correction. The answer comes in the technical readings of the market.

For now, we will assume the market is going through an overbought corrective phase if the major market indexes can hold above these levels:

S&P 1240-1250
DJIA 10,700-10,750
NASDAQ 2200

A significant break below these levels will signal a more severe break to the downside.

Over the past few months, I wrote that I would be holding a large cash position above 1250 on the S&P, and 10,800 on the DJIA. If the markets happen to rally to the top end of our projections, we would simply dollar cost average into our hedge positions (Rydex Tempest 500- RYTPX).

Here is the upside target:

S&P 1300-1350
DJIA 11,000
NASDAQ 2500-2600