Chalk Up A Nice Day For The Bears

The selloff that started at the opening bell accelerated into the close today, with the Dow shedding more than 200 points, and the SPX experiencing its biggest one-day selloff since March.

The breadth in the market was horrible today. There were nearly 3000 decliners on the NYSE, more than 93% of the volume was to the downside, and there were also 352 new lows. That is one lopsided day.

Of course, when I went back and looked at the statistics from March, a day like today was very close to the bottom. I suspect that today is probably getting us close to another bottom, and I will likely look to use further weakness to cover my short exposure.

Perception is reality in the market. And today, with rumors spreading about the subprime market, scary comments from CFC, and bears like Bill Gross trotting out on CNBC spreading more fear, it doesn't really matter what's behind the comments. The market is in the grips of a selloff.

You can see the rise in fear in the +10% spike in the VIX (back to March levels), the rise in the ARMS Index (1.60), or the surge in the put/call ratio (1.42). These are good signs from a contrarian perspective, as they should help the market bottom sooner, and lead to another rally down the road.

The market is also getting deep into oversold territory, so I would expect a near-term bounce as well. But then we will likely come back down to test today's lows. Remember, market bottoms are a process, so you don't need to be a hero. But you should have your buy list ready.