Stocks Selloff Hard - What Are We Looking For Now?

I really don't like obsessing over every tick in the S&P500. I don't like to be that guy.

But when there is volatility, there is opportunity. So for the last few weeks I've been putting up some Fibonacci retracements and potential levels that can become turning points (See Aug 12 and Aug 8th).

This morning the S&P500 fell off a cliff. After rolling over at that 1205 level that we've been watching, we would like to see where buyers can potentially re-enter the market place (including shorts covering). The first chart shows the intraday action using 10-minute timeframes. There was a ton of churning taking place between this 1120 and 1150 level last week. Here we are ending today around 1140:

Does this level "catch" the market again? Or is it like a hot knife through butter? Only time will tell. We have to be extra careful when trading aggressively in this environment. And get used to it, because it appears that this volatility isn't going anywhere anytime soon.

So what if last week's levels don't hold? Let's look back to the longer-term chart that we put up last Monday (updated):

As you can see, last week we held the 38.2% Fibonacci retracement just above 1100. If this level can't hold going forward, we have a major major support level near the 1020 level. This is big, not just because it represents the 50% retracement from the March 09 bottom to this year's highs, but it also marks important support levels that were tested multiple times and held for practically an entire year. If the recent lows in this market do not hold, I would look for trading opportunities near the 1020 level. Wait for the buyers to show up and look for divergences in some stocks showing strength at the time.

I realize that I am getting way ahead of myself here. I suppose that a down 400 points day on the Dow could do that to you. But also, I'm a ball player. I played baseball my whole life. And what do you do before each pitch? You tell yourself exactly what you're going to do if the ball is hit to you. You go over every possible scenario so that no matter what, you cannot be caught off guard. Same rules apply in this game. Be ready or go home.