With a failure to reach the expected target of the 13888 level, the Dow Jones stalled at a Fibonacci 62% level and fell sharply.

With many traders caught off guard in a month which is typically bullish, nervousness has increased in the markets. The big question at hand is should one stand aside and call it a day or should they tackle the index?

The key evidence we have to evaluate is that as long as the 12724 November low is not breached, the Intermediate term trend is still up. Although we had a five wave decline into the November period followed by an ABC correction to the upside, there is still a possibility that we can head higher.

At present the most obvious support levels come in at 13128 and 12950 which should offer support to elevate the Dow higher into the late year end Santa Rally. Right now we need to climb back above 13530 in order to classify a short term low. On a short term basis a break above 13300 should elevate the Dow higher by over 100 points.

On a bearish note, the RSI indicator has also posted a turn lower below its reference line to suggest that the market is indeed weak. Also moving average traders will note that the index is at its 20 day moving average level and will be looking for support here too.

For the bulls however we can still say that the historical pattern of a seasonal rally cannot be ruled out unless the key lows have been taken out.

Unlike the European indices, the Dow is still clearly in positive territory and it will take a major tumble to keep this index lower. Expect volatility to increase for the coming weeks in a low volume environment.

Sandy Jadeja is Chief Market Strategist for ODL Markets and founder of www.Spreadbettingtowin.com where he teaches low risk trading strategies and money management.