There has been quite a bit of discussion on whether yesterday’s move was "the" day of capitulation we have all been waiting for.  Here are some my thoughts I sent out to members last night:

I last left you one week ago following the initial attempt at getting the rescue plan passed and expressed my uneasiness over the state of  the current market.  In that email I mentioned to you:

"No, I don’t think we are done going lower.  Anytime you get a drop of this magnitude with a close at the lows it takes significant time to repair that damage.  I have a more detailed report at the blog with a look at the charts, but the potential support levels I’m watching are Dow 10,000 (psychological support), then Dow 9700, Nasdaq 1900 and roughly S&P 1000.  The VIX soared today, hitting levels just above 48 but I think now we need to hit those highs seen around the 01 and 02 bottoms in the 55 – 60 range which could very well mean another drop in line with what we saw today."

Today was the kind of day I had been waiting patiently for.. a final flush with climactic panic selling.  Admittedly, I was growing impatient as the market continued to grind lower with little sign of abating.  On Friday though, the ominous signal came as the 2nd attempt at getting the rescue plan passed with ease, but the market sold the news hard and the indices finished near the lows of the day.  It mentioned to my Gold members over IM that it was an ominous move and really set us up for a flush of selling today. .. here are some of my thoughts at the end of the day Friday. 

(10/03/08 11:39:55 AM): All, the Q’s took out that key level and this "could" turn ugly.. Now facing strong resistance around 37 and if it can’t clear that real quick and hold its possible we’ll face a late day sell off.

(10/03/08 12:44:05 PM): ..and thar she goes.. monday will be might interesting.. Perhaps the flush out awaits..

So was today the final flush?  Was it the bottom marker we have all been waiting for?  Yes and no.  Yes, the VIX spiked to levels not seen since the 02 crash but there are some problems with today’s move being called "the" day of capitulation that marks a true bottom.  For one, trading volume was relatively quiet and orderly AND the indices still closed significantly in the red, just getting above the middle line of the intraday trading range.  In my opinion, we were close today but not close enough.  It may stabilize the market for a few days but we’re still in danger of testing the lows of today at some point.

If you put some money to work today down near the lows, you have a good low risk entry point for a tradeable rally.  I personally added a bit of the QLD, the XLF and shorted a bit of SMN but since today’s reversal was a bit muted I may take those positions off if we rally a bit in the next few days with light volume.  There is still a tremendous amount of technical damage to work through and there will be plenty of time to get into positions once this market shows more signs of stabilizing.  So if you didn’t get into something today, sit tight.  We probably need to come back and test today’s lows at some point before heading significantly higher again.  Today’s end of day rally was encouraging but it still pays to be cautious.