Tonight I’m just going to share a few quick observations that may put the current situation into perspective:

1) Brian C., sent me a study he did on VIX spikes hitting extreme levels. On Friday the VXO closed over 20% above its 10ma. I looked at this in a study and compared my results to his. They both said pretty much the same thing. More often than not the VXO spike leads to an S&P bounce fairly quickly. Those times that it doesn’t – watch out.
2) I looked back in history to find all the times when the S&P 500 gained at least 2% in one day and then lost all of its gains and more the next day – similar to this Thursday and Friday. No need for an elaborate display of the results here. It only happened once – March 24, 2003. In other words, 2% rises are simply not supposed to get wiped away in one day. There is no reliable precedent for what happens next.
3) The CBI didn’t budge and remains at “3”. This indicator remains neutral. In a market that is selling off in an unprecedented way I’d be more comfortable taking a shot on the long side if this was spiking. Perhaps with a few more days of selling, but right now I’m not seeing anything that is screaming buy.