For the first time in this crash, I looked at the Dow down 600 and felt dread, not excitement. I took it as a signal and bought a few short-term calls (with about 1/200th as much as I have in long-term puts). Maybe this is what a capitulation feels like in this kind of a market, although darker thoughts inside of me say we’re not there yet. Too bad nobody trading today was on the floor in 1929.

We are now down exactly 40% in exactly 12 months, and 26% in three weeks.  In 1929 the Dow fell 48% in 2 months and 1 week. It really started to crash after October 11, and dropped from 352 to 230, 34%, in 18 days. It then embarked on what must still be the most furious rally of all time. From the close on Black Tuesday, October 29th to Thursday, October 31, the Dow gained 19% in two days (32% intraday). That blistering move shows up here as the zig-zag in the drop from 381 to 198:

Source: Yahoo! Finance. Click image for sharper view of terror.

Of course, after peaking at 273, the Dow dropped right back to the area of the previous lows, contemplated the situation, and plunged again until November 13, the bottom of the Great Crash of ‘29. Then after rallying all that winter, it resumed a more orderly decline the rest of the way down to 37 (intraday — the close was 41) on July 5, 1932.

I remain massively short long-term, but this is the most probable way-point for a rally that I have seen in the past 2 weeks. It may finally be that everyone who was going to panic in this slide has done so. They will all panic again soon, but it won’t take much relief to cause a bounce from here. There are plenty of bargain hunters and technical traders who might jump in on the first uptick tomorrow, afraid of missing out on a rally, and thereby causing one. Either that or today could have been Black Thursday to tomorrow’s Black Friday.