S&P 500 (SPX) — After holding at S&P 500 level 840 for almost seven weeks, broader-based selling broke that support Wednesday.

The chances are now very high of a further sell-off of stocks as the bear market resumes its plunge.

As noted in the Daily Trader’s Alert, all of the other indices broke, too, and the next support for the S&P 500 is at the Oct. 9, 2002, closing low of 777.

But traders may want to be alert for a dead-cat bounce after such a dramatic breakdown. The possibility of a reflex rally is high this week, since November options expire on Friday, which could result in a squeeze of the shorts.

Traders could use a rally to position Exchange-Traded Funds (ETFs) for a further decline, and longer-term investors could use it to either sell recent positions or get rid of some of those nagging losses with no dividends and prepare to position their portfolios for higher-quality and bigger-dividend yields.

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Sam Collins is a registered, fee-based portfolio manager who may be contacted samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.