Up. Down. Up. Down.

Seasick yet?

For many, this continued volatility is getting hard to take. If you started buying stocks at what seemed like great low prices in August, September, or October, and then saw your portfolio go even lower, it could shake your confidence as an investor. For the first time in a long time, I feel firsthand the temptation many people have to just sell it all and sit in a money market fund for the time being. (Not that I will. But I get it.)

And of course, every day brings a different story, which makes it even harder to feel any confidence about where we're heading.

Who's really driving this?
This morning, various pundits and bloggers are saying that yesterday's afternoon rally started when the Dow, the S&P 500, and the Nasdaq "retested October's lows." In other words, the indices went down for hours, until they got so far down that they were even lower than the lows of a few weeks ago. Then, suddenly, investors -- or somebody -- started buying.

I think that "somebody" includes a lot of traders. Those are the folks who care about "retests" of lows, and who would be quick to buy once the market seemed to find "support" (and quick to sell at "resistance," wherever they think that is).

Of course, yesterday's support level could be just one more signpost along the road of tomorrow's freefall. Or it could be that we've seen the last of those levels and the market will begin its recovery from this neighborhood. 

Where's it going?
If history is any guide -- when it comes to the markets, history can be a great guide, until it isn't -- yesterday's lows might well stand as the historical bottom of this bear, or somewhere close to it. Past bear markets have tended to find a bottom and then bounce up and down for a while, mounting short, sharp rallies and then falling back down again. So far, we've followed that pattern -- lows on Oct. 27, roughly 18% worth of gains over the next six trading days, and then right back down to the lows.

If you bought stocks during that rally, you're probably feeling kind of down right now -- you've lost a big chunk (on paper, at least) in just a few days. If you've been waiting to buy, and you're starting to think that the market has passed its low point, you may feel like you've missed the boat.

Thoughts for the current market
If you fall in either of those two categories, consider:

  • Almost nobody buys at the exact bottom. If you buy when stocks are low and sell when stocks are high, you'll make money. If you try to buy when stocks are lowest and sell when they're highest, you probably won't make any more money -- and you might make less. Market timing is notoriously difficult and best avoided.
  • The best stocks have been great buys at any price offered in recent weeks. Maybe you bought Apple (NASDAQ:AAPL) at $108, and now you're kicking yourself because you've missed several chances to buy under $100. But if you're a long-term investor, and you believe in Apple's long-term prospects, $108 is still a great buy -- it was going for more than $200 not long ago! (And if you don't think Apple's long-term prospects are strong, $96 is no bargain.)

When you're watching daily price movements on a group of favorite stocks, it's easy to lose track of the long term trends -- and to think you've missed out when something like Apple makes a 10% upward move. But perspective is important. Look at how these well-regarded big-name stocks have done recently -- and where they were just a few months ago:

Stock

8/15/08 Closing Price

Lowest Close Since 8/15/08

11/13 Close

Apple (NASDAQ:AAPL)

$175.74

$88.74

$96.44

3M (NYSE:MMM)

$73.49

$53.50

$64.43

Baker Hughes (NYSE:BHI)

$77.76

$29.60

$32.73

Genentech (NYSE:DNA)

$98.23

$73.00

$82.32

EMC (NYSE:EMC)

$15.32

$9.41

$10.43

Novo Nordisk (NYSE:NVO)

$61.52

$44.02

$51.57

Sasol (NYSE:SSL)

$50.60

$20.70

$26.17

Source: Yahoo! Finance.

These stocks -- all five-star CAPS selections, by the way -- are all still well down from their levels in mid-August. And the market was already deeply into a bearish trend by Aug. 15 -- most stocks in the market, including these, were already well off their 52-week highs by that point.

My point is this: You don't need to buy at the absolute bottom to be sure of buying at a good price, when so much of the market has been sold down so far from its highs. But you do need to make sure you're buying good companies that make sense with your overall portfolio.

Should you buy the stocks in the chart above? You could certainly do worse. But if you'd like some really good ideas to buy today, consider a free trial of Motley Fool Stock Advisor, our flagship newsletter service. The Stock Advisor team has been sifting through the post-crash rubble looking for the best buys in all corners of the market. You can see their best ideas for new money now, and get 30 days of complete access to all of their recommendations, with a no-obligation free trial.

Fool contributor John Rosevear owns shares of Apple. Sasol and Novo Nordisk are Motley Fool Global Gains recommendations. Sasol is a Motley Fool Income Investor selection. 3M is a Motley Fool Inside Value pick. Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.