I’m certainly not predicting a new bull market any time soon. The United States and the majority of foreign economies will continue to come to grips with a protracted slowdown that will curtail consumption, inhibit expansion and result in a long economic recession. The damage done to the financial system has been monumental these last few months. There is nothing central banks can do to reverse that – we’re too deep in the cesspool.

But stocks and weaker credits are going to muster a spectacular short-term rally – and soon.

The fear gauges I track are completely off the charts heading into Tuesday’s trading.

The most telling of these indicators is the VIX, the Chicago Board Options Exchange Volatility Index. The VIX is down more than 8% today and that’s a good sign because its direction since late August has been parabolic.

The VIX hit the record books on Monday as global markets swooned again. At 52.05 before the start of today’s trade, the VIX is trading at maximum pessimism as investors scramble amid the worst global panic since the 1973-1974 crash.

History suggests that a significant turning point lies ahead for stocks, which are tremendously oversold. A rally will ensue and it’s likely to be quite powerful.

October 6 probably came close to marking a short-term bottom for equities. The advance-decline line on the NYSE hit unbelievable numbers yesterday with New Highs at 13 (almost entirely comprised of short dedicated ETFs) and a mind-blowing 1,973 New Lows. Advancing volume was just 119,572,320 compared to declining volume of 1,753,362,656. This data tells you that we’re heavily oversold and stocks are going to post at least a big bear market bounce at any time.

There are two types of investors in this bear market: The smart ones and the nervous Nellies.

The nervous Nellies are in a total state of panic and dumping everything on any given day stocks post a big loss, disappointed the market won’t stabilize. These investors, if you can call them that, will probably be out of the market for years to come once this chaos concludes. They really have no business being in the market in the first place.

The smart investors are concerned, of course, but are cool and calm.

The smart investors are selling into strength or on days when stocks advance. Other smart investors are even buying their favorite stocks at big discounts compared to just a few weeks ago. Warren Buffett is one of these investors. You can cherry-pick or average-down some great companies right now but you must have at least a 5 year investment horizon.

Also, gold should be at least 10% of your personal net worth at this point – if you can get it.

There’s a major shortage of physical gold right now in the United States and Europe. I’m disappointed gold isn’t trading north of $1,500 at this point amid the panic.

With supply shortages now becoming acute and production growth almost non-existent this year, I’m still forecasting at least $2,500 gold before this bull market is over. With all the massive expansion of credit coming our way in this world over the next few years everyone, regardless of age or risk tolerance, should have at least 10% of their assets in physical gold bullion, coins or gold certificates. If you can’t access any of these three avenues, then buy a gold exchange traded fund.

Gold is the only physical asset out there right now that isn’t deflating. In the last great deflation of the 1930s, FDR confiscated gold. I have a feeling gold prices can rise in a deflationary economy. This might yet be its finest moment.