Here are a few considerations: 1) Sentiment is very negative, both in the media and as shown by put/call ratios and the VIX (spiked to 37.5 intraday, and closed above 30). The market panic got headlines across mainstream media, and the public has noticed - I have had non-market people ask me what is going on, a typical sign of market extremes. 2) Price has moved down very far, very fast, by historical norms. A crash has already occured in Asian and European markets this week. The S&P as of Tuesday morning was down just over 20% from its highs, in a little over 3 months. That is comparable with extreme moves leading to market lows in prior bear markets & panics. 3) The market became heavily oversold recently. It went below the lower Bollinger Band, it is significantly below the 50 day moving average (1445) and the 200 day moving average (1488). 4) Valuations are reasonable in outright terms (PE below 16), and extremely attractive relative to bonds (earnings yield of 6.3% for stocks vs 10 year bond yield of 3.41%). 5) The likely recession is now fully discounted by pretty much everyone in the market. The market has not yet discounted the potential for further government action, or for good news from other (non-subprime) sectors of the economy. 6) The Fed is now in aggressive rate cut mode and responding to the slowdown concerns. These are all factors which, when taken together, typically give the potential for a large market rally. Even a move just back to the 50 day moving average i.e. nothing more than a bounce in a bear market - would be a 10% rally from current prices. The final part of the picture is that very few people right now are anticipating or positioned for a strong rally by the market. The sentiment has changed markedly from the last 2-3 weeks. Back then, rallies made people complacent - the thing to do was short that complacency. Now, dips will make people fearful of a rerun of the recent carnage - and the thing to do will be to buy that fear. So, my plan is simple - any time the market is down a bit, and especially if it is down on the open, I will buy. For risk control, on trading positions we can place a stop say 20-30 ES points below the recent lows. However, I also think this is a great level to ditch your cash & bonds, and go 100% long stocks. There are many great growth stocks, companies with excellent long-run prospects, that are off 25%+ and can be bought for the cheapest in some time. Cash is now yielding 3.5% and the 2 year note is a ridiculous 2%. If you are staying 100% in bonds or cash now in your investment portfolio, then you are a either a madman or a masochist. Exploit the fear - go 100% long (or more) stocks, buy dips & fear spikes, buy all bad news, and prepare for a run to S&P 1400. You have the ideal opportunity Wednesday open in the US, due to the selloff in Apple. Most investors & traders will be "fighting the last war" and think this will trigger another selloff. IMO it will simply be a classic down open, up close. If this happens then it is the first confirmation that we have shifted from bearish to bullish market action. So - either buy the dip open, or wait for the close and buy if it is unchanged or up. This also gives a nice risk control - if tomorrow *is* a nasty down day by the close, then I'm probably wrong and it would be premature to do trading buys (although I think investment longs here are still good).