Are we headed back to 7,000 territory this week?

KenTrester answered one year ago …

From where we stand, the lower end of the trend is Dow 7,500, so a break below 7500 would signal big trouble ahead. However, we expect Dow 7,500 to be tested at least once more before any kind of permanent market bottom can develop. And frankly, we put the odds of that support eventually failing at about 50/50.

As long as sentiment remains on the negative side, and except for some "long only" institutional investors, that is where sentiment currently is, option buyers should continue to lean toward buying puts.

But high volatility is causing put options to bake in higher prices, so it is important that you use limit orders when you open positions. And also take smaller positions than you normally would.

Along with economic parameters losing their validity, so are historical volatility parameters, and caution is the best course action until the future playing field comes into clearer focus.