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.

Two contrarian signs that a market bottom is approaching have raised their heads. The first is the always somber Marc Faber, the famed proprietor of the Gloom, Boom & Doom Report, who said late last week that the current down-drift in stocks is the beginning of a global bear market.

The second is the increasing chatter that the massive U.S. budget and trade deficits are going to come back to haunt the U.S. economy.

Mr. Faber's bearish pronouncements and the general call by economists and other pundits saying this is the time that the trade deficit is going to crush the U.S. economy almost always coincides with a bottom of the US market.

For the most part, virtually every indicator suggests the U.S. market is approaching a bottom. However, a good contrarian indicator, the AAII Index that measures individual investor sentiment, has stayed stubbornly high. Actually, bullish sentiment has been increasing during this market's decline.

If you are part time watcher of the markets it can be easy to get caught up in the crowd mentality and lose sight of the larger picture.

The market is making some nice gains today, and although some attribute it to the Fed, or to Cisco Systems Inc. (NASDAQ: CSCO) results, a lot of it is just the market bouncing back from the sell-off. We had a mid-summer correction; they are not uncommon and all the fright about the market a couple of weeks ago was overdone. Bad news always makes better headlines than good news. And if you are selling news, that is good.

Let's look at some numbers. The Dow Jones Industrial Average started the year at 12,459 and then set a record breaking slam through the 14,000 barrier. At that point it was up about 12.3%. Then we had a dip from 14,000 to 13,211. At which point the DJIA suffered one of its worse weeks in a year. The DJIA hit bottom on July 31 at 13,211 (still up 6% for the year) the DJIA is now up to 13,600. (up 9.1% for the year). Just mid-way through today the DJIA gained 127 point going from 13,504 to 13,641. That means that today the market rose from up 8.3% to up 9.4% for the year. We are well on our way to a comeback.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Power generation stocks, such as Dynegy Inc (NYSE: DYN) and AES Corporation (NYSE: AES), have gotten beaten up pretty good the past few weeks. We blogged recently about the merits of jumping into AES. But Dynegy is another company that investors should look into after the recent market weakness.

As we blogged yesterday, investors should look at sectors that got hit hard in the tech-telecom bubble, as scars in these sectors run deep and investors are quick to run for the hills even though industry fundamentals are much improved. The same can be said for the power generation business.

The power generation business, particularly the merchant power producers, went through a similar type of bust cycle as the telecom sector, with many companies entering bankruptcy. However, Dynegy, which was a must-own stock along with Enron in the late 1990s, was able to avoid bankruptcy, bring in new management, dispose of its money losing tolling arrangement and recently made a large acquisition of a privately held power generator which will help it to grow.

Management in Dynegy is top notch, having come from Duke Power, and has executed magnificently to turn this company around and turn it into an important player in the power generation business. This is one stock your want to consider for your buy list on this market correction.

Market sentiment seems to be favoring the bears again. My cursory research indicates that 65% of investors are again thinking about an impending decline while the other 35% are still cautiously optimistic. It's only seldom in these last few weeks that I came across the occasional person who insists that the bull charge, which began in 2002, shows no signs of relenting. Just the fact that there has been a noticeable increase in the past few weeks (even before these past few days of declines) in the volume of discussions and analysis regarding how to recognize a bear market is coming, how to prepare for it's arrival and what to do when it gets here, signals to me that investors are getting skittish. The funny thing is that it's almost a universally accepted fact that no one can truly predict a bear market turn.

I gave a warning a couple weeks prior to the last contraction that I thought one was coming. That quick downward slide in fact happened. I'm now going on record again as declaring that the bear is coming for another swipe. I expect that this time the cut will go deeper and bleed a bit longer. (Indeed, I originally wrote this post after Tuesday's sell-off, but already this downturn is longer and deeper than the last). Last time around, I sent you that message based solely on gut instinct with little else to back it up. This time, however, I'll clue you in to some of my thinking.

Dell Inc (NASDAQ: DELL) most likely has a good six-to-nine months of work before management changes begin to show up in results.

Last night's earnings release, by Dell's standards, were simply awful:

• Reported revenue declined 5%; when adjusting for an extra week in the previous year, however, revenue increased 3% -- still awful.
• Operating margins are now down to 4.9% -- not good.

While Dell's results point to a growth company gone bad, there is some room for optimism. Gross margin came in at 16.9%, versus estimates at 16.5%. So the worst in gross margin performance might be behind the company. However, SG&A expenses were higher.

So why build a position in Dell? Hewlett Packard Company's (NYSE: HPQ) operating margin is 7.6%, margins that Dell used to hit. Also, Dell, in its peak years, would generate gross margins over 20%. Therefore, Dell, if it can get its house in order, could show some nice operating leverage.

Another potential positive is that at some point the industry will have a PC upgrade cycle. This could put some wind into Dell's sails. Don't throw Dell's stock out with the bath water. Chip away on market corrections. The stock, if a turnaround plan is well-executed, could hit $30 on signs of improving business and margin trends.

Was yesterday's decline in the market really a correction?

Correction is a vague term that market pundits and the media throw out when they aren't quite sure what's going on. Yesterday was no exception.

Part of the problem is that people define a market correction like art. They know it when they see but they just can't really explain what makes one decline a correction and another a down day.

My old employers at Bloomberg News define a correction as "reverse movement, usually downward, in the price of an individual stock, bond, commodity or index. If prices have been rising on the market as a whole, and then fall dramatically, this is known as a correction within an upward trend."

On one level yesterday's 416 point decline in the Dow Jones Industrial Average was "dramatic." U.S. stock markets had their biggest fall in four years which wiped out this year's gains in the Dow & the S&P.

But as my colleague Sarah Gilbert pointed out, the decline on a percentage basis was 3.29 percent. It wasn't that big compared with other recent big sell-offs. So, looked at from that vantage point, yesterday's market action wasn't that "dramatic."

People try to apply cold logic to a market that sometimes acts irrationally. But instead of saying we don't know why or we're puzzled, people trot out buzzwords like market correction which really raise more questions than they answer.