After such a wild day, one can't help but notice several indicators were flashing rare bullish signals. One such indicator showing a very strong trend was the TRIN, or short-term trading index. The TRIN, or better known as the Arms Index, was created by Dick Arms many years ago as guide to determine excessively oversold/overbought markets. Simply put, the indicator measures up/down issues relative to up/down volume. The resulting figure tells a tale of overbought/oversold -- a reading under .6 is considered overbought whereas a reading over 1.5 is considered oversold. Extreme market action tends to be short-lived and corrected to reflect a perceived balance. Absolute daily readings are difficult to interpret for a trend, so a better measure is choosing a moving average (MA). An ideal timeframe would be a 10-day simple MA. The TRIN has historically done an efficient job in calling market tops and bottoms. Mr. Arms has noted previously that readings of 1.5 or more for the 10-day MA will generally result in a good bottom being made. This seems only too logical as the sellers become washed out after a good market rout. Conversely, a bullish read under .6 on this moving average is cause for alarm, as the market would tend to be ready for a fall.

This brings us to today. From the outset, the TRIN was at an excessively high level. This continued to be the case for the first hour of trade until it continued with a fierce upward run into double digit territory. This indicated trouble was brewing unless some buyers stepped up to the plate, which did not occur. At one point, the TRIN reached 17 -- nearly unheard of levels! You have to go back to the Crash of 1987 to find such a high level of selling pressure in one day. Why did this extreme level happen? We can point to the small denominator (adv/dec volume), which ended the day at a paltry .06 How extended was this? it was truly off the charts - the highest level of the TRIN over the last year is around the 4-5 range, within a couple of days of the bottom after the June 8 TRIN fear spike. For reference, this number generally averages .70. The Advance/Decline line was also contributing as well, but not nearly as bad as volume.

With nearly 16-to-1 down volume vs. up volume on Tuesday, this flashes another rare indicator of excessive fear. Paul Desmond of Lowry's Research did a fascinating study a couple of years back where he showed that these panics in selling pressure are wonderful opportunities to buy looking out over the next several months and over the next year typically as well.

Another unbelievable sign of a fear panic is the 1-day percentage jump in the CBOE Volatility Index (VIX), which gained 61% today! That's the biggest 1-day percentage jump in fear EVER! Only two other times since 1990 has the VIX jumped over 50%, on July 23, 1990, and November 15, 1991. Both times the market was marginally higher by 1-3% over the next month but was much higher 6 and 12 months later.

All of this suggests that while day to day, there's always the chance of some more pullback, the odds favor buying into any further dip for an intermediate-term recovery in the midst of this mini-panic. The sheer relentless selling pressure as the day wore on Tuesday had the feeling of the 1987 crash, when "portfolio insurance" led to unchecked selling. But in retrospect, while others were calling for a worldwide recession after the 1987 crash, the market stabilized and went on to roar ahead over the coming year and coming decade. We expect you'll be well served to not panic, but rather be looking to buy other quality names as pullbacks afford new bullish opportunities in an environment of controlled growth, still-low interest rates, and healthy fear to climb the wall of worry to new highs later this year.

Price Headley is the founder and chief analyst of BigTrends.com.