Meisler: We've Seen Volatility Like This Before

Then I read the article and was fascinated by this line: "And after two tech-giant disappointments and some profit-taking, Wall Street investors threw the brakes on a two-day recovery rally that led the Nasdaq composite index to its second-highest percentage gain ever and gave the Dow Jones Industrial Average some upward momentum after Friday's record 617.78-point plunge.

What do we see here? We see Nasdaq had its second highest percentage gain ever. Oh boy, how many times did we hear statistics such as that expressed after last Monday's [Oct. 13] rally? Then we see the DJIA had a record 617-plus point plunge on a Friday [Oct. 17]. Gosh, where have we heard about 600 and 700-point plunges on the DJIA before?

In other words folks, we have seen volatility of extreme proportions before. We have seen the indices move up and down with swings that we haven't seen before. In 2000 the tech bubble was unwinding. Now the credit bubble is unwinding.

I have no idea what the proper template is for this market. Is it post-Crash 1987? I have many doubts that it is. That was a bull market phenomenon; this is clearly not. Is it post 9/11? Well, that too raises doubts. That was not a financial crisis, but rather a crisis more akin to a world war.

Is it like the spring of 2000? Well, if it is, we have a long way to go on the downside.

Or is it the 1930s? All I can say is that I truly hope it isn't because that means we still have a depression ahead of us.

I have said before I won't know when we get to the low until well after the low is behind us. I will only know in retrospect. What I do know is there are no bases left on the charts, so if we are at the low then we are only there in terms of price, not time. It will take many months before any sort of base can be built.

Therefore, I expect this market will be more about trading than investing for many months to come. And as I laid out last week, I still think we will get a low for a tradable rally sometime in the latter part of October.

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This was originally published on RealMoney on Oct. 20, 2008. For more information about subscribing to RealMoney, please click here.