For the polyannas out there who think it will all be ok....

Any questions?

We could conceivably undercut the closing lows from 02 and bounce, but the odds do not favor this.  Instead, the odds favor massive forced selling showing up at that point.

We are severely oversold on virtually all indicators.

This has both a good and bad side.

The good side is that it is a coiled spring and can produce a hell of a bounce in the market if something is done that imparts confidence.

The bad side is that from severe, deeply oversold conditions you also get crashes.  If what little confidence is left disappears for any reason, so will the floor.  It could be literally something as simple as one imprudent sentence out of a lawmaker or Administration Official's mouth.

On the internals I do not see the sort of protection buying (PUTs) that would cushion a fall.  This is especially true in the Nasdaq 100 today, where people are actually buying calls into this decline.

The paradox of this situation is that if a waterfall decline begins there is nothing to stop it, because investors who hold stocks long have bought little protection against it - all they can do is sell, which further stokes the decline itself.  (If you hold a PUT you are protected against any decline below the strike.)

There are also indications that Europe is in extremely serious trouble; the Pound in particular is deteriorating this afternoon.  I have no news on the wire beyond what was known last night to explain that move, but its big - nearly two full cents, or about 1-1/2%, in the last six hours.

I'll go over this in more detail this afternoon on the BlogTalkRadio show at 3:30 Central this afternoon; tune in.....

In the meantime you may want some better protection than that umbrella above.