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The markets plunged today, experiencing their biggest declines since March 2003. Of course, the markets are up huge since that time, so a little perspective is in order.

The selling pressure washed up on our shores from China, which plunged in overnight trading yesterday. That means traders will nervously be watching the Asian markets tonight to see if the contagion continues.

As for the fear gauges I mentioned earlier, some of them spiked to levels I can't ever remember seeing. This tells me that panic, which usually peaks at the end of a prolonged decline, has already entered our markets.

To wit:

• The VIX soared +64% today, its biggest move since after 9/11
• The NYSE registered 99% downside volume. This might be an all-time record
• The ARMS Index hit 16. I have no data going back 10 years that shows another reading this high (maybe it hit this level in the crash of 1987?)
• The CBOE put/call spiked to 1.69, hitting panic levels
• The volume in the QID (ultra-short QQQ ETF) topped 15 million shares; more than 3x its average volume

It has been said that bull markets often experience the sharpest declines. Because these declines were so sharp, and likely shocked many, the dust will not settle overnight. But I still believe most of the damage has been done, we just need more time to heal and digest the sticker shock.

The SPX is -4.2% off its previous high, the COMP is -4.9%. I do not believe this will reach a 10% pullback. As such, I want to start dipping my toe back in the long side on another 1-2% downside.

After a little bit longer, it will be time to start looking at the high relative strength stocks that held up best during the decline, and will likely lead the market on the next leg higher.

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