In the very short run (as in a couple of days), I’m fairly bullish. Longer-term, I’m bearish, based on yesterday’s breakdown and today’s downside follow through. After yesterday’s beeline from the open of 859 to the close of 806 for the S&P 500, I was expecting an upside reversal from the onset today (as I described in an earlier blog entry). Instead, we opened much lower, and then continued to sink.

So how am I bullish in the short run? The VIX hit its upper Bollinger band, and the market is well above its lows for the day. I think both are the result of just falling too far, too fast. I’m looking for a quick correction of the drastic move lower (which means a brief bounce), and then a continuation of the bigger-picture selling… all three indices hit new multi-year lows today.

One caveat - I don’t know that I would try to trade any of this just yet. We may be due for a short bounce, but I’m also looking back at the S&P 500’s chart between October 2nd and October 10th. We saw seven straight days of massive losses, and there’s certainly no reason it couldn’t happen again.

But what about the VIX? It also did the uncanny between 10/2 and 10/10, by plowing into new high territory without a second thought. So, we can’t make assumptions here either.

The best thing the bulls have going for them at this point is the VIX’s gap this morning, and the upper Bollinger band. That ain’t much to take to the bank though.

Let’s see where this all goes; I’m not fully convinced either way.

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