Even though there was a pretty good bounce in the closing minutes, it was a downright nasty day for the bulls. The point loss was big, breadth horrible and volume increased. The major indices did hold above recent lows, but the more we test these levels, the less likely we will hold. It is not an inspiring technical pattern, and there is no reason to be very optimistic.
The most striking thing about the action today was the aura of hopelessness. Usually when we have a big negative day, there are lots of bottom-fishers anxious to declare a low and jump in. Today, the mood was mostly just exasperation and disgust with a market that is apparently pricing in a huge depression.
Maybe all this negativity is a good contrarian indicator, but the problem is that it has been extremely gloomy for a while now, and it is impossible to precisely time when things are so negative that they can't get any worse. The whole idea of contrary thinking is that when things are at their worst, everyone who is going to sell has done so. That isn't an easy thing to measure, and to a great degree, contrary thinking is in the eye of the beholder.
After the long downtrend and the crash action, we should expect a period of volatility, and then finally some basing action. Unfortunately, the period of volatility is not slowing yet. Emotions are still on edge, and we can't assume that we won't see more downside before it does finally subside.
The key to making money in the market isn't to guess the ultimate low, but to buy when conditions are best for some sustained upside. We sure aren't at that point, so stay cautious and don't be impatient.