The textbook scenario would be for us to get a relief bounce for a few days followed by a retest of the lows. After the lows are retested the market would be likely to embark on an intermediate term advance. This has been the scenario I have been leaning towards but I have some doubts. The textbook has not been working so well recently and too many people are expecting a similar outcome.
As we rally I will look to lighten up slightly in order to give me room to buy on a retest. Part of the reason I have not been aggressive is because my individual stocks have been performing poorly. This has bagun to change as Vodafone reported excellent earnings and Wellpoint has staged a nice rebound. Now that I have some breathing room I expect to be more aggressive if and when we retest the lows.