Quite a day today, I would love to say that I predicted this but I did not. In fact, I went long on the gap down open in my short term trading account and got stopped out for 14 pts/contract in the S&P, a five digit loss. I did mention that we needed a decline into March/May to setup a buy for a rally into a summer high. I did not expect something this sharp, so it remains to be seen if this down move will effect the fundamentals enough to eliminate the buy signal I was anticipating.
My big picture timing model has still not generated a sell signal, which makes me think we will rally back up, but I do not know if we will go down more first. Drops this sharp do internal damage that is tough to assess after just one day. Do not be a hero when volatility gets like this, if you place any trades, trade smaller than you usually do to take into account the volatility increase.
Hopefully the commercials are buying this drop, it will be interesting to see the next COT report.
