There are numerous reasons to believe that the lows made yesterday will be durable lows. There was a great amount of fear and panic seen once the S&P 500 broke 1120 on Monday. To my eyes it looked like capitulation and almost all of the indicators I look at show that bearishness is about as extreme as it gets.
We also had some positive divergences yesterday in that we made lower lows but the number of new lows on the NYSE was lower than those seen in early August. Additionally, the market is not as oversold as it was in early August. This type of action is typically seen at good lows as the downside momentum is slowing.
When we broke below 1120 on the S&P 500 I started buying on a scale lower until I was aggressively positioned. While I believe we have bottomed I am now starting to reduce my position. I f we rally through the end of the week I hope to get rid of all of my adds. That would leave me net long but not as aggressively so.