Investors have become accustomed to bull markets -- long periods of stock price appreciation, i.e. a rising stock market. That's been the norm since the start of publicly-traded stocks in the United States, and certainly a feature of markets in the post-1980 period.

Provided that the U.S. economy is growing in a sustainable way and increasing its productive capacity, bear markets have been the exception, the momentary pull-back, when one takes a long view of the investment horizon.

The current bear market can be seen in that light, again, provided the nation's economy is on a sustainable growth track with an increasing productive capacity.

Still, the key in the above has been the U.S. economy (obviously). Absent a healthy economy, different Dow case studies pop up.

For example, what if the Dow didn't fall -- and didn't rise -- for seven years? In other words, a sideways Dow where no progress is made? It seems like a remote possibility, but that's exactly what occurred from early 1966, when the Dow fell below 1,000, until late 1972, when the Dow reclaimed the psychologically-significant 1,000 level.

If you believe the Dow Jones Industrial Average is a leading indicator of economic conditions six to nine months ahead, Tuesday's Dow activity is not good news.

The Dow officially entered bear market territory when a Tuesday morning decline drove the world's most followed stock market average beyond the level indicating a bear market -- down 20% from the October 9, 2007 high of 14,165.

What exactly is a 'bear market'?

Technical analysts, economists, and others argue that a 10% decline -- called a correction -- is a normal pull-back or pause in a bull market, a market where most stocks are likely to rise.

However, a 20% or greater decline is not healthy. Technical analysts say it indicates investors and traders are not simply taking short-term profits, but are concerned about the prospect for stocks in the quarters ahead -- three to nine months out -- and are exiting the market, in favor (historically) of bonds and cash.

For the above reason, 20% declines are usually interpreted by market advisors and participants as a sign that stocks are likely to be under pressure in the months ahead.

With Wall Street still digesting the latest round of sub-par economic data even as it braces for potentially more, economists and analysts said investors can look forward to one 'certainty' in the weeks ahead -- market volatility, as the financial community gauges the U.S economy's probable economic path for 2008.

Market bears will cite the housing sector's recession, related mortgage and asset-backed defaults, slumping corporate earnings and consumer spending, high energy prices, and uncertain job growth as reasons the Dow and the broader markets are likely to continue to fall in the weeks ahead.

Market bulls will cite solid corporate earnings from companies in international markets, relatively low inflation, a declining trade deficit, the fair or undervalued price of some U.S. equities, and the U.S economy's ability to adapt as reasons the markets may reverse their slide in early 2008 and head higher.

Now that the Dow has fallen 10% from its October 2007 peak of 14,164 to 12,743 -- i.e. now that it officially qualifies as a correction, it's a good time to summarize the investment landscape, fundamental and technically.

Although numerous fundamentals (high energy prices, subprime mortgage defaults and subprime-asset losses, housing sector slump, slowing U.S. consumer spending) suggest U.S. economic growth will slow up ahead, and hence that more selling is ahead for the Dow, that, in fact, may not be the case.

If limited to roughly 10%, the Dow's decline constitutes solely a correction. Keep in mind also that the Dow is a lead indicator that always points to economic conditions 6-9 months ahead. Hence, investors, if they believe that measures being taken are addressing important concerns, could conclude that economic conditions will improve and hence send the Dow rising very soon.

Indicators are lining up this morning for the market to bottom. The Dow will hit its 200-moving day average and virtually every other oscillating tool is suggesting the market is tremendously oversold.

The S&P 500 and Russell 2000 have all also corrected to their long-term moving-average support levels. As with most major corrections, the averages have broken through or will break through them this morning, providing that additional fear investors feel when the market finally capitulates.

Noteworthy pundit Byron Wien, of Pequot Capital and long-time Morgan Stanley strategist, said in a CNBC interview earlier this week that his target for the S&P 500 is 1,600. Tom McManus, who has also developed a good long-term track record, upped his target for the S&P 500 not too long ago.

All told, fear has replaced greed. It is time to line up your wish list and start buying. Stocks Theflyonthewall.com has recently blogged about that investors may want to look at include National Semiconductor Corporation (NYSE: NSM), General Motors Corporation (NYSE: GM), Global Crossing Limited (NASDAQ: GLBC), Level 3 Communications Inc (NASDAQ: LVLT), AES Corporation (NYSE: AES), UAL Corporation (NASDAQ: UAUA) and Home Depot Inc (NYSE: HD).

The current stock market correction has created a nice buying opportunity for eBay Inc (NASDAQ: EBAY). After reporting strong 4Q06 results, the stock has corrected as much as 10%.

Morgan Stanley's Mary Meeker said in a report released yesterday that eBay's strong operating performance is continuing into 1Q06 and is tracking ahead of her estimates.

Meeker forecasts strong ASP and conversion rate for sellers which will translate into better pricing and higher profits.

Volume, pricing and conversion improvement will translate into massive cash flow generation for this eBay. Remember, eBay's stock has corrected from a high of $46 per share. That is a sizable correction for this Internet leader.

As a follow up to my blog yesterday, here are a few other ideas to look at as this stock market correction continues to unfold.

Newell Rubbermaid Inc (NYSE: NWL), a stock we have blogged about the merits of repeatedly during the past year, is holding up steady. There are a couple of reasons for this -- first, Newell, as a consumer staple company, attracts money during volatile markets, and second, the belief that its turnaround is for real.

Dynegy Inc (NYSE: DYN) is also holding up well. Similar to the IP transport companies blogged about yesterday, this stock typically got hit hard during these market corrections during the past few years. However, in this selloff, it has declined little. With private equity firms eyeing TXU, investors are beginning to believe in the merchant power business again.

Use this correction and current bout with fear to pick up some good stocks. Newell and Dynegy are companies to throw into your portfolio.

Goldman Sachs Group Inc (NYSE: GS) reported, as has become usual the past few years, terrific results. However, analysts are becoming skeptical.

The terrific results

• Revenue and earnings up 35% and 31%, respectively
• Return on equity was 38%, a massive number
• Trading and principal investments were up 35%
• Equities were up 26% -- principal trading

Planet earth results

• Equity commission up 3% -- up essentially the rate of inflation
• Assets under management grew 6% -- roughly in-line with money supply growth
• Employees up 2%

What these numbers tell you is that Goldman makes most of it money from taking risk. Especially in the fixed income, currency and commodities businesses or what is now called the FICC businesses.

The so-called FICC business you will be hearing a lot more about during the next year or possibly the next few days. That is where all the subprime and prime mortgage trading occurs. All the major Wall Street firms now group their businesses this way. This is where all the leverage trading occurs for the house account.

As we started blogging about a few months ago, be careful of the major brokerage firms. They reported tremendous results during the earlier part of this decade primarily due to fixed income profits. This is now coming to an end. Unless stock commissions go through the roof, these companies are going to have a tough time growing earnings.

Stocks that have held up best during this correction are most likely showing us where investor conviction is the strongest.

For example, one area that has held up surprising well is the Internet Protocol transport sector. Companies like Level 3 Communications Inc (NASDAQ: LVLT), Global Crossing Ltd (NADSAQ: GLBC), and Time Warner Telecom Inc (NASDAQ: TWTC) have changed little in price.

In previous corrections, these IP transport stocks would get crushed. However, that is not the case anymore.

This is a sign to stay with these stock and add to your position as the broader market continues to correct. If investors aren't selling these stocks now, it most likely indicates confidence is building in this space.

Additionally, Expedia inc (NASDAQ: EXPE), the online travel giant, has also held up very well, changing little in price during this correction. The stock has traded all over the place in previous corrections. This is a sign that investor confidence is improving here also.

All four stocks mentioned in this blog have good unit volume growth, operate low-cost businesses and appear to have pricing power returning to their industry -- a good combination to make some good money.

Tom McManus of Bank of America provided some historical context to this stock market correction.

We looked at the largest (most significant) one-day declines in the history of the Standard & Poor's 500 index, all the way back to 1928. We found sixteen instances of declines of 6 or more standard deviations (using historical 3-month realized volatility). Six of these events occurred in the 1940's, 3 in the 1950's, two in the 1980's, one each in the 1920's, 60's, 70's, and 90's. And one, so far, has occurred in the current decade. We continue to believe it is too soon to commit new funds to the market, until earnings expectations drop further to reflect the likelihood of additional slowing, and until stocks' valuation metrics improve to provide investors with a better risk/reward tradeoff.

If McManus is correct and there is more to come, use Yahoo's new financial charts to come up with some buying opportunities. This bull market's corrections have usually bounced off the 200-moving day average. According to Yahoo's charts, this would be around 1350 for the S&P 500.

With the S&P 500 at 1,374, this means we have about 2% more to go on the downside. Fear has returned quickly to this market, a healthy sign for sustaining this bull market. A couple of more days of fear and it might be time to start buying.

A few BloggingStocks readers know that I've hinted about my opinion that a bear market is impending. Well, okay, I didn't just hint about it, I put it in bold print and slapped a picture of a bear on it. Needless to say, I have received strong reaction from both mindsets on the subject. I maintain my stance with the bears and the short sellers.

I have not witnessed an American economy such as we're entertaining now since the early 1970s. I didn't pay too much attention then but I was aware enough to understand what was going down. The biggest contrasts I see between what we went through in that economic train-wreck of the 70s and what we have now is that back then they seemed to have little idea of how to curtail inflation, and the lower to middle income brackets still had paychecks that were rising. These days it seems that inflation is a dragon that can be reasonably controlled, but the lower to middle income brackets have pay scales that are wilting in many regions.

TheFly blogged to avoid commodity stocks back in the spring. Our timing was quite good. However, a lot of these stocks have corrected significantly and are beginning to represent good value.

Pioneer Natural Resources (NYSE: PXD) was mentioned by Archie MacAllaster in this weekend's Barron's Roundtable (subscription required). Pioneer is the third largest independent oil and gas producer in the U.S. and its stock has come down from a high of $54 to $38 -- a big correction.

According to MacAllaster, Pioneer had forward sold a lot of its output considerably below today's prices. Therefore, as these contracts come off, Pioneer can sell their gas at much high prices and earn greater profits, despite the recent natural gas price pullback. Pioneer's reserves are all domestic, so they will benefit from better prices due to the inevitable decline in U.S. reserves.

Also, Pioneer has shrunk it shares outstanding from 145 million to 125 million and is supposedly on its way to 100 million shares outstanding.

In a recent post I made a significant error in a statement I wrote regarding the buyout of Vetco Gray by General Electric (NYSE:GE). I was reviewing the comments readers had made on my posts and you can imagine my horror when I saw the magnitude of my blunder. I conjectured that GE could recoup its investment in Vetco Gray of $1.9 billion in less than two years. I submit to you my humble apology for such journalistic sloppiness. In my half-handed attempt to complete the piece at 3 a.m., I foolishly mistook Vetco Gray's revenue flow and brainlessly translated it as net profit. I hope my readers realized my mistake and understood what had happened.

In amends for my error I offer you this small look into Vetco Gray:

Vetco Gray is the world's leading supplier of drilling and well asset production equipment for the oil and gas industries. It is driven by the principles of commitment to the customer which were instituted and rigorously implemented by its third President and CEO, Donald K. Grierson. Vetco Gray holds offices in the United States, Canada, Mexico, Scotland and Argentina among others comprising a list of 29 countries. Vetco Gray produces wellhead equipment, offshore drilling equipment, pipeline materials and associated aftermarket support and solutions.

On January 7, 2007 General Electric announced that it had entered into an agreement to purchase Vetco Gray from Candover, 3i & JP Morgan Partners for a total $1.9 billion. Vetco Gray is expected to post total sales volume exceeding $1.6 billion for 2006. GE states that it is excited about the complimentary value which Vetco Gray shall add to GE's Italian-based oil and gas division.