I thought the immediate fear of contagion was that the run on Greek banks spreads to Spanish banks, and I guess conceivably, to Italian ones (?)
That being said, I haven't seen bears coming on tv and calling for SPX 800, 950 - 1000, or even 1100. Steve Grasso on CNBC a day or two ago said chatter on the trading floors was thinking about backing up the truck and buy, buy, buy if we were to hit SPX 1260 (50% retracement of move from October 2011 lows to 1422 top this year, plus essentially retest of flat on year (1257?) he said has always historically occurred at some point in year, at least previously). We would obviously have to break 1300 first, as well as (I forgot what he said exact technical levels were), but I think 1290 and 1285 (Libya bottom, Egypt bottom?), and that puts us right back into what previously was that seemingly impenetrable wall of resistance (now support?) from last winter (
http://www.tradingmarkets.com/stocks/commentary/1250-1280-s-p-may-be-a-wall-1578825.html)
Personally, I have absolutely
no idea (not even the slightest inkling!!!) whether we stabilize around here, or break harshly to the downside, but it does seem to me that markets have been getting very tricky for weeks (no longer straight line from lower left to upper right, like first quarter of this year), and perhaps is becoming untradeable again (do not play if you don't have to?), at least until, for better or worse, more cards are put on the table and there is more clarity on where the U. S. economy really stands (e. g. QE3, continuation of Operation Twist, what is real underlying growth rate of U. S. economy once unseasonably warm winter can be factored out...)
Prepare for Volatility:
http://seekingalpha.com/article/584211-prepare-for-volatility)