Large market drops are always shocking events – even for those who are properly positioned to take advantage of them. In light of the benign, low-volatility market we have been in for some time it may be tempting to see this decline as over. However Ticker Sense has a series of graphs that indicate that we are still far from the 10% decline needed to fulfill a standard definition of a "correction."
Barry Ritholtz has a piece that catches up with market technician Paul Desmond. Desmond believes that the market is in the process of becoming oversold, however any subsequent bounce would simply be a shortable opportunity.
Trader Mike has a graph up of one of our favorite indicators – the percentage of stocks that are above their 40 day moving average. (You can see a related version of this indicator here.) While this indicator is moving quite rapidly toward oversold, it is not yet at the point where it indicates an "all clear" signal.
One effect of this correction may be a change in market leadership. For quite some time analysts have been calling for megacaps to begin outperforming their small-cap brethren. Over the last couple of days this has indeed been the case. Roger Nusbaum writing at TheStreet.com has a piece up comparing four megacap ETFs that could be used to play this emerging trend.
As always do your own research, be prepared, but above all else be careful out there.