I have noted my belief that just about every aspect of of the way this market has rolled over into what looks like a bear market and the big picture catalysts that triggered it has been very textbook.

In that light it is possible that it could continue to be textbook throughout the process and on into the eventual real upturn.

If it does continue to play out in textbook fashion then the idea of when the time is right to take a more equitized position should be very uncomfortable–it should trigger an emotional response in people prone to emotion.

One of the things that makes a bottom a bottom is sentiment. Instead of being hopeful after a small bounce people should be very skeptical. Further there should be more talk of getting out of the stock market for good than there is now.

To really wrap your hands around this you probably need to think about what sentiment was really like during every other scary time for the market that you can remember first hand (the older you are the easier this is obviously).

Of course anything is possible. A bottom could be in, there might not be a recession and now could be the time to buy. I don’t think any of that is the case but it could be.

This is the nature of feel good rallies. You wonder if this is the rally and often these moves draw people in only to endure a bit more whooshing.

Giving into emotion with a tweak is ok but big changes right here right now works against the history of how bear markets usually work. The reason I focus on this sort of thing so much is that I think knowing the nature of market cyclicals makes the job of participating in the market much easier.

If you are one to hold on no matter what then knowing how cycles work should make holding on easier emotionally. If you are one to make tactical changes then a little more understanding of cycles could provide a better framework for whatever tactical decisions you might make.

Last 5 posts by Roger Nusbaum

• Municipal Debt - December 30th, 2008
• The NZ Perspective - December 29th, 2008
• The Weekend That Wall Street Died - WSJ.com - December 29th, 2008
• Latins Quiet About Madoff Losses - December 29th, 2008
• Sunday Morning Coffee - December 28th, 2008