Blood on the street

What a day! Just when one thought that the worst was over, on came today.

Following is the weekly chart of S&P 500. In three week's time, we have given away approximately a year's gains.

And finally here is a chart of the Nasdaq McClellan Oscillator showing how oversold the markets are. Its lower than it was anytime in the past three time.

1. Am I looking to go short here?

No, the markets are way too oversold for me to be comfortable holding any short positions here.

2. Am I looking to go long here?

No, the momentum behind this down move has just been too great for me to be comfortable playing any bounces here. Chances are that it will be shortlived.

3. I am just going to stay away from the markets and try not to be a hero here.When will be the right time to step in again?

When the fear is out of the picture. These are markets ruled by fear, not by technicals or fundamentals. And when the technicals dont matter, I pretty much have no edge in trading. And trading without an edge is akin to gambling.

4. How will I know that fear is out of the picture?

When the market stops going down on bad news. In fact, when it starts going up inspite of bad news.

That's it from me. Take care and good luck!