It was another exciting day in the financial markets but in the end, the stock market bulls came out on top despite the television airwaves being dominated by doomsayers. Talk of activity in the December gold 1800 calls (priced at $2,700) and Treasury yields going to nearly zero, has us thinking things are a bit overblown and panic might subside in the near-term. In fact, in the midst of this morning's frenzy a sense of queasiness nearly brought my breakfast back up...and that emotion tends to be associated with a capitulation low.

In yesterday's newsletter, we stated:

Knowing that sellers are often late to the party, I suspect we will get some follow through overnight and into tomorrow morning before a sharp reversal will be possible. Look for support in the S&P near 1243 and then again near 1232. The Russell is off the charts oversold, but that doesn't mean we can move to 755ish before running out of sellers...and we probably will for the reason stated above.

For the most part, this scenario played out...and for this reason, we have to go with the premise that the lows either are in, or very near. After all, swift selling after the cash market open points toward panic liquidation of mutual funds (probably retirement accounts) by the average "Joe". Unfortunately, these types of flushes that force out the weak bulls, often mark the low.

That said, it will probably be a bumpy ride over the next few days and there is no telling what Friday's employment report could do to already tense traders. In other words, even if the lows are in...there are no guarantees we won't see some back and filling tomorrow and maybe even a retest of the low 1240's/ high 1230's in the September S&P...although we'd rather not see it.

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