It can be difficult to know whether a very strong reaction is an overreaction. It can sometimes help to compare it to similar moves in the past. The table below is one I last showed in the 2/2/2009 blog. It looks at  all the times the SPY gapped down at least 2% to start the day. The column on the right shows how long it took for SPY to close above its gap down open (up to a week). Today I’ve also added some red arrows. These mark the other times the gap down occurred following a close above the 200ma.  As you’ll note, a 2% gap in an uptrend is quite unusual.

And for those wondering about event comparisons that is a VERY difficult thing to do. Two events I looked at last night were the 1995 Kobe earthquake in Japan and the 1986 Chernobyl nuclear disaster in the Ukraine. While their local markets were hurt badly, neither event caused much reaction in the U.S. They were essentially 3-5 day pullbacks totaling between 2% and 3.5% in the SPX.

God bless the people in Japan and the Mideast.