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Bears Gain Momentum

Stocks will likely decline faster and further than bulls believe possible, because few buyers are likely to step in and commit new money.

If the pre-market futures hold, stocks are set to open sharply lower this Tuesday. That is not a huge surprise. Since the most recent Federal Open Market Committee (FOMC) meeting, bears have taken complete control of the tape. Sentiment has changed, and despite what some will suggest, that drives stock prices.

I understand, there are those who will say that traders and investors alike, are simply being too pessimistic. Perhaps this is true, but in environments such as this, reality takes a back seat to momentum. Bears are just gaining momentum and standing in their path is investment suicide.

Stocks will likely decline faster and further than bulls believe possible, because despite their claims that stocks are cheap, few buyers are likely to step in and commit new money to stocks. No, they are likely to stand back and concede a decline to at least the July lows. That is SPX 1010.

Yesterday, I attempted to add a new put position for Capital One Financial (COF) - Get Report. The idea was to sell a rally to the 200-day exponential moving average at $39.65. Although the stock did rally, it did not get high enough for me to add a new put position. Today I will change that order.

TST Recommends

Trades: Buy to Open COF September 40 puts for $2.40 or less.

At the time of publication, Terry Bedford held no positions in the stocks or issues mentioned.

Terry is the Founder and President of Bedford & Associates Research Group. Terry writes for AOL Finance and MSN Money and is regularly quoted by the financial media.

OptionsProfits, a new provider of options news from TheStreet, educates investors and acts as a catalyst for trading.

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