According to Bespoke, this week's stock market meltdown of 20.8% ranks second as the worst Monday-to-Friday movement for the Dow Jones Industrial Average since 1900. As shown in the table below, the only week that saw a bigger decline was the one ended on December 14, 1914. (Bespoke used an index reading a little before Friday's close - the final weekly decline was 18.2%.)

The market has dropped by 22.1% since the beginning of October and has not registered a single up-day during the first eight trading days of the month. "We've all heard of Black Monday when markets crashed in 1929 and 1987, but this is truly turning out to be Black October," said Bespoke.

The Dow recorded its record high of 14,164.53 on October 9, 2007. On Thursday, marking the one-year anniversary of the current bear market, the Dow closed at 8,579.19 - down by 39.4% or 5,585 points.

For some perspective on the magnitude of the current decline, Chart of the Day constructed a graph on how the Dow performed during the first year of all major declines since 1900. As illustrated, the first year of the current bear market has been more severe than the first year of any correction since 1900 - and that includes the correction that began in 1929.

The last word goes to longtimer Richard Russell (Dow Theory Letters): "This decline will end as all bear market declines end - in exhaustion. In bull markets we warn, 'No tree grows to the sky'. In bear markets we warn, 'No decline goes to zero, or at least none ever has'. Problem is that you can lose your shirt before a decline reaches zero."

Are we "there" yet? Nobody really knows what happens next, although some indicators are starting to signal that a bounce may not be all that far off. But stock markets are unlikely to find a cycle low before measures are implemented to stem the decline in confidence. It may take a while yet before we see the bear's corpse.

Sources: Bespoke, October 10, 2008 and Chart of the Day, October 10, 2008.

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