Dow Oversold?

Global Meltdown

Obviously we are in the middle of a global financial crises. It doesn't take a genius to figure that one out. The markets are playing limbo with each other, seeing who can go the lowest. So far this morning, European markets are down roughly 5%, Asian markets are down about 8%, and Japan is down 9.4% (the biggest single day fall in 21 years). Trading on both of the Russian markets has been suspended, one until further notice and the other until Friday.

This is all seen as a ripple effect after what happened in our markets yesterday. The Dow has dropped 875 points in two days, closing at its lowest point in 5 years. The Dow is now 33.3% below is record close of 14,164.53 it set last year.

Rate Cut

The breaking news this morning is that the Fed cut its interest rate from 2% to 1.5%. This is being done in an attempt to prevent a global economic meltdown (too late). Along with the Fed, the European Central Bank cut its rate by 0.5% to 3.75% and the Bank of England cut their rate by half a point to 4.5%. The Central Banks of China, Canada, Switzerland and Sweden also cut their rates.

The rate cuts will reduce borrowing costs for Americans who have home equity or other floating rate loans tied to the prime rate.

DUG

DUG- Ultrashort Oil & Gas Proshares. Corresponds to twice the daily inverse of the price of the U.S. Oil & Gas Index. Currently testing support as it touches its previous high. Look for a possible handle to form, maybe a 7-8% decline. If no handle is formed and the stock breaks through support on heavy volume, then think about buying shares.

United States Gasoline Fund

UGA- tracks the price of gasoline at the pump. This etf has broken through its support and is now setting fresh lows. These lows have not been tested since back in February. There is a big discrepancy between the price of gasoline on the market vs. what we are paying at the pump.

Inverse ETF's

With the market in a correction, consider looking at some of the inverse ETF's listed below.

DXD- Ultrashort Dow 30 Proshares. Corresponds to twice the daily inverse of the Dow 30.

QID- Proshares Ultrashort QQQ. Corresponds to twice the daily inverse of the Nasdaq 100.

SDS- Ultrashort S&P 500 proshares. Corresponds to twice (200 %) the daily inverse of the S&P 500.