I subscribe to the theory that when things are at their worst, when you have that knot in your stomach that makes you want to throw up, and you feel like there's nothing but gloom ahead, that is the time to do the opposite of what your emotions are telling you to do.
I call this the George Costanza Opposite approach to trading. Pay attention, this is some of the technical stuff I have ever posted here.
George one day realized that every decision he had ever made in his entire life had been wrong. So he decided that when he had a strong instinct to do something, he would do the opposite. No surprise, the decisions that went against his better judgment turned out to be the right moves.
I only had two positions today, so I had little invested in the market. By the time the Dow was down 300 points, I was stopped out of both positions. However, once I saw the red three hundred flashing before my eyes, I got really nervous. I know, it made no sense, since I was 100 percent cash. Yet there I was, pacing back and forth at my desk. I knew I looked like a fool, so I sat down. That's when I felt the butterflies.
Since I had no positions to exit, I told myself I should sell the market. I felt like I was about to miss the big move. Then I remembered something I had read before. When you just can't take it anymore, that is when a bottom is coming. I immediately went into Zen mode and cleared my mind of all preconceptions. I took a look at some charts and noticed how oversold the market was, so I decided to buy.
I bought ZEUS and RIO, even though the steel sector is on my short watchlist. I bought LEH, AAPL, BIDU, CROX and NOV (I'll post the trades tomorrow). Note that these are very short term plays. I still think the expected bounce might not last, and we could see more to the downside.
Since everybody has analyzed the indexes, I'll refrain from posting the SPY chart. Just remember that a positive hammer stick printed right at support on heavy volume. At the least, this is a sign that we will see a short term bounce.
One last point. It seems that everybody thinks a bounce is coming. CNBC, the Fast Money guys, respected bloggers and even crappy bloggers. This worries me. When everybody thinks the market will zig, that's when it is likely to zag. Maybe this will cause the expected bounce to be short lived. Or maybe I'm just too paranoid.