Dow Slumps 3.6%: "We Are On Schedule for a Very, Very Long Bear Market," Prechter Says

The global selloff in stocks accelerated Thursday, sending the Dow down 3.6% to 10,068 while the S&P 500 lost 3.9% to 1,071.59 and the Nasdaq shed 4.1% to 2,204.

All major U.S. averages are now down for the year and at least 10% below their 2010 highs, meaning the downturn has officially entered "correction" territory.

Unfortunately (for bulls), there's much more selling ahead, according to Robert Prechter, president of Elliott Wave International and author of Conquer the Crash.

"We should be in for [another] week or two of pretty serious selling," Prechter says. "They'll be bounces along the way...but I think this should last a long time. We should be on schedule for a very, very long bear market period."

In the near-term, the veteran market watcher predicts a "dramatic increase in volatility," beyond what's already occurred. The CBOE Volatility Index (VIX) rose another 30% today and is now up about 180% from its late April lows.

Notably, today's selling occurred despite a rally in the euro amid reports of central bank intervention. Joe Brusuelas of Brusuelas Analytics says, "The capitulation in today's market has more to do with the unwinding of the easy money [carry] trade on commodities," which fell again today, with notable weakness in energy and palladium.

Meanwhile, Treasury prices continued to benefit from the "risk aversion" trade with the yield on the benchmark 10-year note falling to 3.21%.

Broken Record or Market Sage?

Other than to say "a long way down," Prechter wouldn't say how much further he thinks the market will fall, suggesting a repeat of the 1930-32 scenario when "extremely sharp rallies" kept investors interested and "feeling like a bottom [was] forming."

Anyone familiar with Prechter knows he's been predicting doom for a long time so it's tempting to dismiss his latest warning -- a veritable repeat of what he said here in February. But he's not a perma-bear and did turn bullish ahead of the bottom in March 2009.

More dramatically, in 1978 he co-authored Elliott Wave Principle - Key To Market Behavior, which predicted a great bull market similar to the 1942-1966 rally. By his own admission, Prechter underestimated the extent of that historic rally, which ran from 1982-2000 and saw the Dow rise 1,500% from 777 to 11,723.

Prechter says the market has spent the past 10 years building a "major head and shoulders" top from those 2000 highs, even though they were exceeded in 2007. Ultimately, he expects a "corrective mode that's going to retrace virtually the entire" 1982-2000 bull market.

"The best place for most people to be is in cash" and equivalents, he says. "You want maximum liquidity until this thing blows over."

Editor's note: We did NOT interview Prechter because the market was tumbling; today's appearance was scheduled earlier this week. Sometimes it's better to be lucky than good...