First of all, I HAVE NO IDEA. This is just conjecture. Going to discuss some various scenarios.
First, lets put the bad trade excuse to its death bed.
The real cause of the crash is the below intraday chart. The crash in the Euro Japanese cross led the U.S. equity market crash by about 5 to 10 minutes. That implies someone is collapsing or taking a large loss. This type of move is UNHEARD of. This creates massive liquidity issues outside the already insolvency issues. You can hear screams of agony from a major institution looking at this chart.
Second, what I consider some absolutes.
If we bounce early tomorrow morning towards 1140 to 1145 you sell into it.
If we open down around 1100 you take profits on shorts. Don't have to cover all shorts. Just take some profits so you don't miss out.
Third - some various scenarios.
I think there is one maybe two cards left to play by world wide government officials that could buy a few more months before the collapse really becomes official. The first is the ECB buying European government bonds. The second is the IMF coming in to backstop Europe. The markets will probably fall until this occurs which will cause some sort of rally until economic data and the UK/Japan collapses causing essentially the end of the game.
So the key is to figure out timing. The ECB came out with their decision today. There is no way they are reversing anything tomorrow. So you have the weekend in which investors will be looking towards. I don't know, but if the markets are down huge around noon to one I would start guessing there will be some sort of end of the day/week rally into the close. If nothing develops over the weekend you really could have a black Monday or Tuesday.
You have huge targets at this point by the market at S&P 1100 (50% retracement of the end of the day rally) and Dow 10,000. It seems highly likely we retest to one of those levels soon. After that you are looking at around 1050 which is around today's lows and the February lows.
There is a wild card in all of this related to the chart above. A major European bank(s) may be in trouble. That creates an entire new problem on an entire new front. While investors are waiting for a weekend surprise from European governments, it could be a weekend disaster revelation.
Bottom line, tomorrow or next week any bounce towards 1140 1150 I think you sell into.
If today did anything it completely destroyed any remaining confidence in the retail investor. After the retail investors was only still gun shy at the markets, to have this happen means they won't be coming back anytime soon.
Volatility is going to remain high. No where you want to sell. I am sure the governmetn is working on secretely supporting this market in some form or fashion.