For those of us who grew up during the Cold War, we received regular practice warnings on TV about what to do during a nuclear crisis.
The civil defense emblem would appear on the screen and a voice would say, "This is a test of the Emergency Broadcast System. This is only a test. If this had been an actual emergency, the attention signal you just heard would have been followed by official information, news or instructions."
That's what this market feels like: This is a re-test. It is only a re-test. If this had been an actual bear market, this message would have been followed by further signals to sell ...
Tune in to CNBC's "Power Lunch" on Wednesday, Sept. 2 at 1:30pm ET. Ron Insana will be a guest.
In a stock-market correction in which major market averages fall 10 percent to 20 percent from their most recent highs, there is often a subsequent re-test of the lowest prices hit in the first leg down.
Those lows occurred last Monday when the Dow fell 1,000 points in the first few minutes of the trading day, ultimately ending that day down nearly 600 points. Stocks fell again the next day and then seemed to bounce back.
After a bounce, there is often re-test, where the averages touch, or even fall below, the prior move's lows. Usually it's just that — a test — and when the wash-out is done, assuming you see positive technical divergences and some fundamental developments that turn the market back around, the correction will be declared over.
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Of course, if the market's internal strength deteriorates further on the second wave down, it could be indicative of something more serious.
But right now, we haven't seen any sign of that, so panic would be premature.
It has long been my view that U.S. stocks are in the midst of a secular, or long-term, bull market that is likely in its 5th or 6th inning.
Prior to this correction, it had been 46 months since U.S. markets had suffered a pullback of more than 10 percent. Corrections occur, on average, every 18 months, so this was long overdue.
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Corrections, by their nature, are short, sharp and scary. Bear markets are long in the making and start with a whimper, not a bang.
Re-tests rekindle those same fears and sometimes feel even worse than the first leg down.
China is in a bear market. China is Japan in 1989.
Ours is a correction — until proven otherwise.
This morning's action — lacking volume and conviction — may very well be the re-test we fear, but one that leads to the capitulation that marks the end, not the beginning, of an unnerving, but necessary correction in stocks.
We can get out of our basements and resume normal lives in a matter of days.
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Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. Follow him on Twitter @rinsana.
