At times like this is a good to take in some historical perspective. Henry Blodget at BusinessInsider has this on P/E ratios (link).
[these numbers are if earnings don't grow and SPY just goes down to the targets]
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... if the S&P fell straight to the high-end of its previous trough range (8X PE, or 460), it would fall another 35% from today's level (700)
If the S&P fell straight to the low-end of its previous trough range (5X PE, or 300), it would fall another 55+% from today's level.
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So, the market is not historically cheap yet, not based on current earnings. SPY 300!? Dow 3000? That would not be a pretty picture and would likely coincide with a major economic depression. Let's hope things don't get that bad. The chart does project that low. SPY 600 is some support, but it is not major support on the long term chart, not really.
I didn't get the smash down at the open that I was looking for. It is a good time to be patient for positions traders, considering the severe oversold condition and huge downside momentum. Being oversold makes it risky to be short, the downside momentum makes it risky to be long.
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