It has been so long since we have had a failed bounce in this market that it was bound to be very ugly when one finally did occur. Too many market players have grown to trust that we will keep on seeing V-ish bounces, and when we finally didn't have one, they had to scramble to unload some long inventory.
This is the first failed bounce since July of last year. Back then, after we made a lower low, like we are seeing today, we flopped around for a few more days and then exploded higher as second-quarter earnings hit.
We don't have earnings to drive the market this time, but we do have a big jobs report in the morning. There has been a lot of talk about a huge downward revision of 800,000. That is pretty well anticipated already, but there is plenty of room for surprises.
I think we see a bounce, but I'm not sure if it happens tomorrow. I expect tomorrow to be a slightly down day overall, although some are calling for more carnage like we saw today. If we have a positive response to the jobs report tomorrow, many are probably looking to sell into the strength, and if we have a negative response, I'd look to buy the pullback.
The Dow close below 10,000 is an important psychological washout. It isn't an important technical level, but it is an important mental one that will garner attention from the popular press. To get to a bottom we need some fear and the Dow's failure to hold 10,000 will create some.
At this point, the best advice I can give is to respect the trend but get your buylists ready.
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