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Volatile Stock Market’s 10% Correction Stokes Investor Fears

The Dow Jones industrial average plunged more than 1,000 points twice this week. More significantly, the Dow and Standard & Poor’s 500-stock index have now each lost more than 10% from their all-time highs set just two weeks ago. The stock market is officially in a “correction.”

Corrections are surprisingly commonplace, typically occurring about every two years. And as the word implies, the market is correcting its excessive previous rise. Stocks moved too high too fast, by this definition.

The crucial question for today’s long-term investors, of course, is does the selling stop here or do we plunge another 10% or so into official bear market territory? I’ll examine the evidence, which is increasingly worrisome, momentarily.

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