I agree with this headline and firmly believe the market's bottom will be well below today's level.
But I also think markets generally bounce a few times on their way to wherever their trend is ultimately taking them. They don't move in a straight line . . . though the last eleven days make a pretty strong argument to the contrary.
If I get my bounce, I'll probably sell yesterday's purchases. Right now, that's not looking likely.
Aug. 5, 2011, 12:01 a.m. EDT
Bottoms rarely look like Thursday’s rout
Commentary: Panics typically are followed by more losses
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Market declines rarely end with days like Thursday’s 513-point drop for the Dow.
So even if you think that we’re just suffering a mere correction within an ongoing bull market, you still should be prepared for lower prices in coming sessions.
That at least is the conclusion that emerged from my analysis of past bear market bottoms. The days on which those bear markets actually registered their final lows typically were rather uneventful — nothing like what we saw on Thursday.
Consider March 9, 2009, the day of the closing low of the 2007-2009 bear market, arguably the worst one since the Great Depression. Even though there were many days during that bear market that witnessed panic selling, the day of the final low experienced a drop of just 79.89 points.
It was more than three months earlier than then that the Dow Jones Industrial Average experienced a panic-induced decline that was as bad as Thursday’s. That day was Nov. 20, 2008, the day when — not coincidentally — the CBOE’s Volatility Index spiked to its all-time closing high near 81.
Many traders made the same mistake then that I fear that is being made today: Thinking that panic selling signals a low. They were three-and-a-half months early.
Full story: http://www.marketwatch.com/story/bottoms-rarely-look-like-thursdays-rout-2011-08-05?dist=beforebell
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