I am back in town on the Red Eye and have a lot to discuss, but it will probably take a few posts. As I wrote on Monday I believe there is room for a little more downside but barring a default in Europe its hard to see a complete collapse. I believe a default is inevitable but the Europeans will likely be able to kick the can a little further down the road as they are following the script of the Federal Reserve.
The reason I believe there is room for a little more downside is that while the S&P 500 corrected by 50 points from the top, sentiment has not corrected much. We have seen some fear the past couple of days and I guess one can say we have done the minimum in terms of sentiment correcting. But this is not typically the sentiment seen at the kickoff to strong rallies. It would be nice to get one more move lower that breaks 1175. That should get sentiment lined up for a strong year end rally.
I sold a decent amount of SPY puts when the S&P 500 was testing 1175 as I don't see that much more downside from those levels. If we get a break of 1175 I will get more aggressive.