For the second time recently, it felt like we on the verge of some real panic, but we held on and then reversed strongly. Last Friday it felt like we were ready to fall into the abyss, but some believe that rumors of the impending Fannie/Freddie bailout had leaked and helped to hold us up. Today we had Lehman Brothers and Washington Mutual on the brink of taking us down, but lots of rumors were circulating about potential buyouts and Fed moves, and that seems to have been enough to save the market once again.
These intraday reversals provide some good trading, and they give the bulls some hope, but they are not sufficient to change the big picture, which continues to be quite troubling. We are bouncing around within a downtrend, and the July lows are looming. I think it is just a matter of time before those levels are breached, and this sort of action today just sets it up. The bulls that are being sucked in during these bounces will be the panic sellers that cause the breakdown.
The bounces we are seeing are exactly what you'd expect within a downtrend. They are probably not indicative of bottoms.
I have absolutely no qualms about maintaining extremely high cash levels.