I think a drop to 7000 tomorrow could mark a short term bottom, I would not be shorting anything tomorrow, with the VIX approaching new highs we dont know whats in store, I think we could see the next VIX reading above 100 very soon which could mark a short term bottom in the market. When there is this much fear in the market and 99.9% of investors predicting an even further drop (like myself) the market is ready to move in the opposite direction. Aside from that what I really believe what this market is headed for is a short term bottom, but other than we will bounce greatly due to the extreme vix reading, however what will happen next in my opinion is the market will drop back to news lows and move further down at that point voltility will dry up GREATLY leading towards a very narrow trading range on nearly all indexes, volume in my opinion will dry up and sideways market action will stick around for a long time, Im saying for years, new highs on the DOW are years and years away, I Wouldnt doubt if we drop somewhere below 5000 and trade sideways for the next decade. This market is going to be a totally different market when this credit crisis is behind us probably sometime in the next 10 years.
And for this Roubini guy, I remember seeing him on Bloomberg when the DOW broke 10000, and they say they were inviting him back, because he in fact did predict all this, and even then he said unfortunately it would get much worse.