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I’m putting that trading account money to work on a gap down tomorrow and it looks like that is happening due to another slaughter in the Asian markets. I think the Lehman CDS auctions tomorrow are important and that uncertainty will be gone from the market around lunch time. Today was the washout and tomorrow will be the fakeout. This won’t be THE bottom-bottom, but a relief rally may come, starting tomorrow.

-We closed on the exact lows, outside the 20day bollinger band again.
-Volume was tipped towards the heavy side today. Its particularly heavy considering holiday trading + the dynamic of the short ban rule has kept that other side out of the market.
-VIX made another all time high.
-Relative strength indicators are now pinned.

This difference between this time and every other time in the last 40 or so years, is that the indicators have reached oversold levels only seen at the worst of times. The number is probably less than 8 or 9 times during that timeframe. However, we have either very very rarely to never seen this type of volatility. So if volatility is the difference between then and now, yet the indicators are the same. That tells me that the size of the moves are larger now. Well, we have only seen the down move on that side of volatility and not the up side yet. So when/if a relief rally occurs, it will be larger than the typical relief rally we have seen in the past. Lets face it, the VIX could drop 20 points down to 40 and still be HISTORICALLY ridiculously high. That would provide major fuel for the market to move higher considerably.

Now I’m not saying we are going back to the highs of the year. I’m only looking towards, LAST FRIDAY’S close of 1099 in the SPX; 1947 COMPX; 619 RUT; 10325 DOW. That is all I ever got into this trade for to begin with. I have a feeling its going to take 3 weeks to get there.

My plan tomorrow is to buy weakness. I’ll be doing with ITM calls in either indexes, SPY, QQQQ, as well as leveraged ETF’s. I might even go into options in the most beaten down financials, solars, dry shippers, or anything else that has been decimated. RIMM and AAPL will be interesting.

I don’t think we will close on the exact lows of the weekly bar, we will close higher and that will carry over into next week. That’s my plan for the money that went to cash two days ago.

And I’ll say this, I’ll never forget these times. In the last “real crash,” I was trading baseball cards, not stocks. I’ve lived through a true crash now and I’ll remember it well. I’ll remember the comments made on StockRake.com during these times and know we’ve been through something together.

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