US, Europe Indexes May Fall at Least 10% by mid-October

The bankruptcy of Lehman Brothers and surprise takeover of Merrill Lynch may signal a 'big daddy' of bear markets, in which stocks could fall as much as 50 percent from their peaks, Robin Griffiths, technical strategist at Cazenove Capital, told CNBC Monday.

"I'm afraid the current one is shaping up to be the stuff of legends and most indices are not low enough to discount this yet," Griffiths told "Squawk Box Europe."

The major US and European indexes should fall "at least 10 percent as an absolute minimum," by the middle of October, Griffiths said, pointing out that most indexes are poised above July lows which are likely to fail, causing capitulation.

History shows that normal bear markets usually cause declines of between a quarter and a third from an index's peak in as little as nine months, Griffiths said.

"A really big one is 50 percent, as the 2000 to 2003 one was … and those go straight into the history books and then occasionally you do get much worse ones than that and they go into the annals of legends," Griffiths said, adding that markets are facing a really big one or worse.

The Dow Jones Industrial Average is off 2742.54 points, or 19% from its record close of 14164.53 hit on October 9, 2007, ahead of the market open Monday, but it could go much lower.

"This was the first globally coordinated growth phase and now that it's burst, it's the first globally coordinated recession and in certain parts of the world it's got the characteristics of a depression," Griffiths said.

Investors should start to tentatively look at buying into stocks if a 10 percent decline in seen by the middle of October, Griffiths said, adding that a 15 percent fall would be a clearer signal.