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Kandel on a bear market
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April 12, 2000: 6:49 p.m. ET
Present Nasdaq slump could turn the tables on the record bull market
By CNN Financial Editor Myron Kandel
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NEW YORK (CNNfn) - Bear market?
Sounds scary. Conjures up images of the 1929 Crash, or more recently the 1973-74 plunge that carried the Dow Jones Industrial Average down from above 1000 to 577. That drop of 45 percent, the biggest in recent history, wiped out fortunes and frightened investors out of the stock market for years, even decades, to come. And we're hearing those words again as the Nasdaq composite index plummets.
The conventional definition of a bear market is a prolonged decline that amounts to 20 percent or more. Note the word "prolonged." The Meltdown Monday crash of Oct. 19, 1987 sent the Dow plummeting 22 percent in one day - a total of 35 percent from its high two months earlier. But that wasn't a bear market because that plunge, as steep as it was, lasted only two months, and then the market started to ascend again.
Despite its wild fluctuations, which have intensified in their volatility this year, stocks are still in the midst of a record bull market, which started in August 1982, with the Dow at 776.92. Right now, the Dow is less than 400 points away from the record high of 11,722 it hit in January. And the Nasdaq composite, despite suffering from a major correction, is still 50 percent higher than it was 12 months ago.
 What about that word "correction"? Wall Street says a correction is when stocks fall 10 percent from their recent high. No time frame required there. In times past, a correction usually took years to develop. Nowadays, one can take place virtually overnight. Before the present slump in the Nasdaq started after that index powered to a record 5048 on March 10, the Nasdaq had fallen more than 10 percent on three separate occasions in the first two months of this year. But those didn't even qualify as official corrections because they reached the 10 percent mark intraday, only to bounce back by the close of trading.
The present slump, however, is much sharper and more sustained, with the Nasdaq down more than 20 percent as it threatens to test the 3649 level it reached at the bottom of last Tuesday's 500-point free-fall before recovering part way. The technology stocks that led the Nasdaq to an 85 percent gain last year and 24 percent more in the first ten weeks of this year have clearly fallen out of favor, pushed aside by many of the Old Economy stocks that many supposed experts considered passé just a month ago.
Still, it's too early to call this a bear market in Nasdaq stocks, no matter how much pain this decline has inflicted. It's no surprise to see last week's lows tested, although the optimists had hoped the carnage was over. I don't expect those lows to be penetrated, particularly if good earnings begin showing up in the days and weeks ahead. So don't get scared off if the words "bear market" get thrown around loosely.
(Myron Kandel is CNN's Financial Editor. His column appears every Wednesday on CNNfn.com.) 
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