The Bears Still Look Hungry

Capitulation, my foot.

Monday's trading may have created one of the most gut-wrenching days in stock market history, but it hasn't brought equity values to a bottom. A broad market index like the S&P 500 must slide another 20% or more from here before it is properly valued. Chillingly, even after this year's 30% drubbing, tech stocks must lose half their current value to reach sensible levels.

In other words, the S&P and the Nasdaq will both need to drop to around 700 before stocks hit a floor. The one piece of good news is that we're in the last leg of the postbubble correction. But as all action-movie fans know, the last sequence is always the bloodiest. The end is nigh, but it is also in sight. The bad guys in this story are yet to be slain: nosebleed valuations, earnings tampering and a hamstrung macro environment. ...