From Vince Farrell at RealMoney.

Those are astonishing numbers.

If you are a bear and are short, you must be cognizant that there is a tremendous amount of firepower on the sidelines.

Much of the proceeds from the intense selling is sitting in cash.  Yields on one month and three month Treasury bills were as low as 0.04% and 0.07% a few days ago.

Some of this cash has been earmarked for redemptions but some is because hedge funds are sitting on their hands.  Many of these hedge funds are down 15%, 20%, even 40%.  Hedge funds are not paid unless they earn a positive absolute return.  More poignantly, their business model is threatened by such bad numbers because they are not paid egregious fees to lose people money. 

What I think is going to happen is that when the market moves higher, it will do so in a tremendously violent way, with perhaps a move of as much as 1000 points on the Dow in a day and maybe 2000 points over a few days. 

This will be caused both by short covering and also by hedge funds rapidly pouring money back into the market.  A fund's viability is threatened if it is down 20% or 30%.  It is far more viable if it is down only 5% or 10%.  If the hedge funds sniff out that the market is moving up, an avalanche of cash will come back into the market, causing the market to soar.

This is why I have been scaling in.  I do not think that we will see a classical bottom, at least in the near-term.  This has not been a classical sell-off so it is unlikely to be a classical trough.  The rally will be red hot and waiting for an all clear signal means you will miss it.

At least that is my opinion.