Dow needs to drop below 8,500

My take on a prescient July column from Jon Markman, updated at bottom

Using research from Michael Belkin, MSN’s Jon Markman, in one of his best columns, says the Dow needs to go that low before the bear market ends.

In a nutshell — if the Dow finishes below the average of its last 200 weeks for four weeks in a row (which the Dow now has), it usually heads for its 200-month low.

And, that low is about 8,360.

Plus, if the Dow, in the past, has hit a bear market and stayed there more than a year, it drops an average of 42 percent. Again, that gets us around 8,300 or so.

Markman’s advice to investors?

Stop fighting the bear. Use mini-rallies to help yourself as you can, but don’t expect too much.

Update, Oct. 9: And, here were are, or near that point. So, what’s the panic? Wells Fargo and Citi have enough money to fight over the corpse of Wachovia. If Paulson does a mini-Sweden on U.S. banks, the IMF will be reassured. The G7 meeting Friday will probably get enough big members of the EU on the same page to take care of things there.

We still have to reach the bottom on Main Street, and the Dow probably won’t break 10,000 and stay above it for 18 months, but we all knew this bubble needed bursting.