The world is coming to an end. Well, probably not. It's just that we are getting a supersized version of last years selloff. I am sure the P3 crowd are in hog heaven right now, but as bad as it seems there are reasons to believe that it might be closer to ending than beginning. For one, the NYMO is more oversold than at anytime in the last 3 years, perhaps the last decade. However, when this situation occurs it usually means lower lows as the NYMO builds an accumulation bottom.
Secondly, the SP500 has probably completed wave 3 of (C) down with waves 4 and 5 to come. The bottom is likely to be in the cited support levels from the previous post. Should this turn out to be only wave 3 of (1) down as the P3 proponents argue, then the next most likely support is around 950 to 960. I think the latter is less likely but should it occur, then a massive wave (2) rally to back above the April 2010 highs would probably follow offering traders a potential 40% rally (not the worst of news) and time to prepare for the end of the world.
The Qs touched the April 2010 high today and should find support at this level down to 47+/-. If wave (C) = 2.618*wave (A), then the target would be 46.03, which is probably the worst case scenario for the near term. At the moment I am still of the opinion that the Qs are in wave (C) of [X] of a flat correction and nothing that has happened so far alters that point of view.
Traders should keep their heads about them during this extreme volatility. If you were holding long positions, you should have long since been stopped out and sitting on a pile of cash even if with a drawdown. While I am disappointed that I covered short positions a week too soon, the fact is this is not the type of thing that one can predict reliably. If we have seen the top of primary wave , then there will be many months and perhaps years of shorting opportunities ahead of us, so there is nothing to get worked up about. On the other hand, a rally may be coming in the next few weeks, so it's time to be thinking for oneself and not just following the herd.