No matter where you look, every body is wondering whether last Monday’s S&P 500 drop of 8.8% combined with yesterday’s 8.3% loss at the lows and 3.8% loss at the close is the capitulation we need to call a bottom. Was the last-hour recovery yesterday a sign that the tide has turned?

Here’s a round up: Mark Hulbert: “It’s worth remembering a truism about market psychology that has been too often overlooked in recent weeks: When genuine capitulation finally takes place, few will recognize it as such at the time. In contrast, an eagerness to declare that capitulation has occurred probably means that it hasn’t.”

Bill Cara: “Equity markets complete their Bull and Bear cycles with increased volatility, which is the case today. Bull cycles end when the actors run out of cash needed to push prices higher. Bear cycles end because cash holdings build up to very high levels amid the growing opportunities to buy value.

I feel we will do better from here on, and that by far we’ve seen the worst. I think the woes of the credit market ended with the collapse of Bear Stearns, and credit spreads are already much improved since then. If spreads continue to come in, the write-offs at the big financials will end, and we may even have some write-ups in the second half instead of write-downs.

Valuations are attractive, and valuation spreads are now about one standard deviation above normal, a point at which valuation-based strategies usually begin to work again, and momentum begins to fade.

Most housing stocks are up double digits this year despite calamitous headlines, a sign the market had already priced in the current malaise. I think likewise we have seen the bottom in financials and consumer stocks, but not necessarily the bottom in headlines about the woes in those sectors. Although the economy is likely to struggle as it did in the early 1990s, the market can move higher, as it did back then.

There’s no need to panic as we have seen it all before! However, if you need your money within the next five years then you will be well adviced to take your money out of the stock market. If you have more than 10 years before you retire then you need to keep investing in the stock market. The worst mistake you can ever make right now is to stop contributing to you 401K plan! You have to keep contributing to your retirement plan as it will help you in the long run due to the Dollar Cost Averaging theory.

Dollar cost averaging is a strategy used to mitigate market risk through the orderly buying of securities at agreed intervals and set amounts. Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years, providing a cushion against changes in market price.

By using this strategy of acquiring stocks and securities, you are capable of buying more securities when the price is low and few when the price is high. Eventually, it will average out with the potential to increasing the value of your potfolio. This is why it is vitally crucial to remain in the stock market. A lot of stocks of fundamentally sound companies could be purchased at a bargain right now!