Editor's Note:

No new trades tonight.

The major U.S. stock market indices are slicing through support levels. Volume is surging as the selling feeds on itself.

We could be nearing a capitulation sell-off. That's when investors start puking up their stocks to sell them at any cost. You can see the surge in "fear" as the volatility index spikes to new two-year highs.

The stock market's close on its lows this afternoon would suggest a weak open tomorrow morning. I would not be surprised to see a drop to 1,850 on the S&P 500 before bouncing. The bounce could be big that's why we lowered all of our stop losses on current put plays.

Currently the S&P 500 is down -6.8% from its all-time high at 2,011 set about four weeks ago. A drop to 1,850 would be a -8.0% pullback.

chart of the Volatility Index:

chart of the S&P 500 Index: