The illusion of a self-sustaining recovery has disappeared. There was hope that inventory re-stocking and pent up demand would drive the economy when the stimulus wore off. Those hopes are slipping away along with stock prices.
At some point, everything bad will be priced in. That hasn't happened yet. You don't get bottoms when traders think we're in a trading range. You get bottoms when traders expect continuous selling. We'll have our summer correction, bottom, and then go up. I actually think we'll finish the year above 1200 because the economy is so weak that odds favor it getting better rather than worse. Historically that is almost always the case.
Today's gap down doesn't seem panicky at all. It feels like a gap and go scenario to the downside. I hope I am wrong because I would love to sell between 1090 and 1095. We are in the middle of the down leg, so I want to short rallies, not try to bottom pick.
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