A lot of market players were hoping for the ugly close on Monday. That didn't happen, but they got their wish today. The reason they wanted the market to close at the lows is that it indicates panic conditions and often feeds on itself the next day. In other words, they are rooting for capitulation with a capital "C."
With the ugly close today on heavier volume, I don't think there is any doubt that market players are panicked and anxious to get out of this market at any price. From a contrarian standpoint, things can't get much more negative than this. One problem is that the volatility measures, most notably the VIX, are barely up. Those who are looking for the bottom would prefer to see it spike even higher than its already rather lofty perch around 53.
From the perspective of those looking for a bottom, the best thing that could happen now is a gap-down panic open in the morning to wash out the last remnants of hope. Given how extreme some of our other readings are, that would certainly be enticing for the contrarian bottom-fishers.
For those of us who aren't trying to be so daring, it is painfully obvious that we are in a downtrend of historic proportions, and we should be in no hurry to put our capital at risk at this time. It is only after the market holds a low and builds a base that we will want to start building positions. Leave the bottom-fishing stuff for the folks who like to roll the dice. There will be plenty of time to rack up gains when we eventually see a better market.