By Mike Swanson
We are on the edge of pure fear and panic when it comes to the stock market. By just about every indicator you may use to measure the market it is extremely oversold and ready for a bottom. The number of stocks below their 20, 50, and 200 day moving averages are at extremely low levels not seen in decades.

The ratio of down to up volume on the Nasdaq was over 95% two days last week, hitting 97% last Monday, which is a level I've never seen before. The VIX is above 40 and has been at an elevated level for the past three weeks. According to the Investors Intelligence Survey there are more bears than bulls in the market, which is a positive from a contrarian standpoint.

I read through lots of commentaries and listened to several podcasts over the weekend and just about everyone is saying this. And when it comes to the general public the fear is out there. I have had several people call me out of the blue worried about their retirement funds and mutual funds. These are people who never call me about the stock market.

The fear is growing and this is the type of fear you see at important bottoms. The technical indicators are off the charts.

I do expect some sort of bottom to come in sometime this week, but I am concerned that this bottom may come after a waterfall decline. The fear and panic could morph into terror. This would be something I had never seen happen before, but we saw a glimpse of last Monday.

I believe the President, Treasury Secretary, and Fed Chairman may have created an extremely dangerous situation. All three of them - and throw in the Democratic Congressional leadership - claimed that the stock market would collapse and the economy would go into a depression if the Wall Street bailout bill did not pass. This talk succeeded in terrorizing Congress into caving in to Wall Street and has also disturbed the American people. It has created a sense of unease and insecurity in the United States.
Some desperate people have convinced themselves that all will be fine when the bailout bill passes. FOX News has been running 2-hour news "specials" with titles like "Saving the American Economy" in support of the bailout bill this weekend. If the stock market falls hard in the next few days it is possible that these people will panic. The fear created by those in support of the bill could turn into terror and irrational panic as unreasonable expectations have now been created for what the bailout bill can do.

George Bush played with fire when he gave a primetime speech to the American people in which he said if you do not pass the bill the stock market will crash. He may have created a self-fulfilling prophecy.

I was against the bailout bill, because I do not believe it will fix the situation and believe that it will pile up so much more debt on to the Federal government that we may see a full blown dollar crisis down the road.

We have already seen multiple bailouts this year and not a single one of them has stopped the credit crisis or put an end to the bear market in stocks. At this moment the costs of all of the bailouts totals $17,000 per every single American household. You will pay for this through higher taxes or higher inflation.

Take a look for yourself and these are conservative estimates, because I believe the bailout of Fannie and Freddie and last week's bailout bill will cost in the trillions. No one knows how much it will cost in the end. But this is how things stand as of now:

Check out the bailout type and the cost to taxpayers:

Financial bailout package approved this week
up to or more than $700 billion

Bear Stearns financing
$29 billion

Fannie Mae and Freddie Mac nationalization
$200 billion

AIG loan and nationalization
$85 billion

Federal Housing Administration housing rescue bill
$300 billion

Mortgage community grants
$4 billion

JPMorgan Chase repayments
$87 billion

Loans to banks via Fed's Term Auction Facility
$200 billion+

Loans from Depression-era Exchange Stabilization Fund
$50 billion

Purchases of mortgage securities by Fannie Mae and Freddie Mac
$144 billion

POSSIBLE TOTAL
$1.8 trillion+

NUMBER OF HOUSEHOLDS
PER U.S. CENSUS
105,480,101

POSSIBLE COST PER HOUSEHOLD
$17,064+   Continued...