This is NOT the time to sell stocks. In fact, if you’re clamoring to dump stocks because you’re in a state of absolute discontent, then you’ll have your moment very soon.

The VIX or Chicago Board Options Exchange Volatility Index is now in record territory ahead of this morning’s opening on Wall Street. This fear gauge is now completely off the charts (see chart below).

Panic has gripped global investors and stocks are getting pounded like there’s no tomorrow as fear rules the marketplace. The VIX is now trading at 63.92 – an all-time high. Previous extreme readings like this one have portended to massive market reversals.

I’m not sure what policy initiative will instill confidence in this market, but it’s coming. Stocks are extremely oversold and will post a massive up-crash that might last several days or more. That’s your opportunity to sell into a bear market rally.

Previous secular bear markets like this one have resulted in enormous short-term rallies. For example, between 1968 and 1972 the Dow gained 40% in a bear market rally before tanking again. This also occurred in the post-1974 period on several occasions as stocks mustered huge gains before heading into the basement again. And even during the Great Depression stocks posted huge gains from 1933 to 1936. Big bear market rallies do occur and this time won’t be any different.

I was actually encouraged by IBM’s earnings yesterday and Big Blue’s ability to secure short-term financing. But the market doesn’t care. The big picture is highly bearish and investors have completely lost confidence in the market, the economy and the ability of credit markets to get functioning again. And that’s what a panic is all about – a lack of confidence.

For my personal funds, I added (again) to big blue-chip names on Thursday. I’m still avoiding the banks where I’ve taken a bath this year but remain committed to companies with strong balance-sheets, great brand-name recognition and good earnings. Yes, there are many large-cap companies still making money in this mess. If you’re investment horizon is five years or more than this is the time to cherry-pick those names.

Amazingly, most investors are incredibly conditioned to chase prices higher when stock prices are soaring; yet, the opposite is true when prices are falling.

We’re a long way from a new bull market. There’s no disputing that. The United States and other countries are embarking on a long and painful cycle of de-leveraging that will take a while to cleanse. This won’t be a pretty environment for investors. Yet despite the ongoing carnage to our portfolios don’t forget that the best time to buy for the long haul is exactly when prices are this cheap. Legendary value investor Sir John Templeton would be a buyer today or at least dollar-cost-averaging into his favorite stocks at the point of what he called, ‘maximum pessimism.”

Have a good weekend. See you on Monday.