Was Friday morning the final capitulation? Was that big whoosh down at the open -- followed by the rush back up -- it? Is it safe to go back in now? As you can imagine, the answers are both yes and no.

There was a capitulation of sorts Friday morning, which has to do with the big down opening followed by the snapback rally. We get snapbacks when shorts cover, and I believe we saw shorts covering Friday morning.

But remember that Friday was also a triple options expiration day, and those tend to be volatile in any market. We saw such high volume Friday partly because of the morning capitulation, but I believe it had more to do with the triple expiration. We can even see that in the Volatility Index reading Friday: It nearly got to 60 on an intraday basis before settling back to close under 50. I believe this results from a combination of the expiration and the culmination of a very difficult week in the market.

What I believe Friday's action did was give us a benchmark.

The S&P 500 made it down to 944 intraday and closed at 965. I know everyone is sitting around waiting for that "test" of 923 from the October 1998 lows, but back in October 1998, the S&P 500 had a closing low of 957. Aren't we splitting hairs? I have always advocated an area on the averages, not exact levels, so I believe we are now in the area.

Friday's action also saw the number of stocks making new lows on the New York Stock Exchange jump by more than 200 to hit 784. When we get increases like that from one day to the next, it tends to show some sort of panic or capitulation selling has taken place. But I don't want to focus on this statistic in that way because, like the oscillator, we never know what the extreme reading will be. If we do get a snapback rally from this point, we'll then have an extreme reading by which to match any successful test.

The oscillator -- yes, it is oversold and gets more so each day -- is now even lower than it was in fall 1998. Beginning this Wednesday, it will be "dropping" four-digit negative numbers going forward. (This is a 10-day moving average, so each day we "drop" the number from 11 days ago. As of Wednesday, we'll drop a string of negative numbers that are all minus 1,000 or greater.) That doesn't mean we have to rally, but it does mean that the downside will tend to lose momentum. Even if you replace a negative 1,500 with a negative 1,700, it only equates to negative 200. Divide that by 10, and it gives us a loss of just 20 on the oscillator. So imagine what would happen to the oscillator if we get "only" a negative 600: The oscillator would rise just because of the math. We need the oscillator to rise so that it too can set itself up for some sort of a successful test.

In terms of sentiment, the Market Vane consensus of bullish traders is back at 20%. This is an extremely low reading. At the spring lows, this indicator's lowest reading was 18%.

We still don't have anything that looks like a real bottom. If we are to have a real bottom, then I still believe it will come in the form of a W. But Friday's statistics may have given us some of the extreme readings we need to begin the process.