Any surprise that buy on the dip didn't work this time? The Feb 28 bounce after the plunge on the 27th cemented the buy ont he dip mentality with many and the expectation that we would not have two rough down days in a row.
While I said last night that the market looked oversold, I also pointed out that some signs of capitulation were missing in Thursday's dive. We all know that markets can remain overbought for as long as they can remain oversold. I look at certain blogs and use them as contrary indicators - a bunch last night were saying "buy on the dip" and declaring that Thursday was a big "panic" day.... great contrary indicators that kept me looking at things with a more critical eye last night.
TRIN was low again and I suspect that what we're seeing is heavy, heavy damage largely confined to stocks closely tied to financials, or heavy damage in issues that are highly dependent on them (eg. regular tappers of the commercial paper markets, etc). I also suspect that the VIX is magnified by fear tied to the financials, but the further you get away from the financials the less implied volatility spikes you'll find which is why I like looking at the TRIN for a real broader market perspective on fear. It is panic in the financials, but not in big areas of the market like tech, or in names with clean balances sheets like Minnesota Mining and Honeywell, to name a few.
So, to me its very bad that the market finished at below the lows of yesterday and at levels not seen since April. I was willing to keep an open mind, but this is starting to look ugly. HA! Maybe that's the best contrarian indicator - that I am starting to get concerned.
It sure is looking like we're going to test the 200 dma on the S&P and Dow, or at least come close before we get a bounce. That's my quick impression late this afternoon and I will develop more thoughts as the weekend progresses.
Here's my CNBC options report for today: Options Report: Playing and Dealing With Volatility