What advisors are telling their clients 3:15 PM ET Wed, 20 Jan 2016 | 07:09 
 
 U.S. stocks closed lower Wednesday but well above session lows as the S&P 500 held a technical level and biotechs recovered in late trade. ( Tweet This ) 
 
 Traders noted that once the S&P 500 tested the 1,800 level in early afternoon trade, buyers started to come in. 
 
 "Any rally that starts is going to be violent to the upside," said Art Hogan, chief market strategist at Wunderlich Securities. 
 
 Read MoreWhy the wild market reversal 
 
 
 
 Small-cap stocks and biotechs led the initial recovery. The major averages more than halved intraday losses, with the Nasdaq composite attempting gains as the close approached, but the late-day rally lost steam. The S&P 500 ended at its lowest level since April 2014. 
 
 "People who caught a free ride on the way up are getting out of it," said Jeremy Klein, chief market strategist at FBN Securities. 
 
 The major U.S. averages are down more than 9 percent for the year so far and are more than 10 percent below their 52-week intraday highs, in correction territory. 
 
 
 
 The Dow Jones industrial average closed about 250 points lower after earlier falling nearly 566 points with IBM contributing the most to declines. UnitedHealth contributed the most to gains. 
 
 
 
 The S&P 500 closed 1.17 percent lower, near 1,859, after earlier falling more than 3.5 percent through its October 2014 intraday low of 1,820 to hit its lowest since February 2014. Energy closed down nearly 3 percent after briefly dipping 6 percent. 
 
 
 
 
 
 The Russell 2000 closed about half a percent higher after falling 3.66 percent intraday. The Dow transports briefly turned higher before closing down about half a percent, still well off an earlier decline of more than 3.5 percent. 
 
 "The market's been hurt in the past two-and-a-half weeks by strong openings. That invites selling," said Bruce Bittles, chief investment strategist at RW Baird. "Today the market opened sharply down and that shows a lot of pessimism here and may help turn things around." 
 
 
 
 The Nasdaq composite closed mildly lower at its lowest since October 2014 after attempting to recover from an intraday decline of more than 3.5 percent. The iShares Nasdaq Biotechnology ETF (IBB) reversed a decline of more than 3 percent to end up 2.75 percent, but well off session highs of 4 percent gains. 
 
 "My guess is what you're seeing right now is some short covering," said Paul Yook, portfolio manager at BioShares Funds, adding "the outlook for the sector is actually really good." 
 
 Netflix ended mildly lower, while Apple closed a touch higher, both reversing sharp declines in intraday trade. 
 
 
 
 "Obviously you're going to have to bounce at some point. The biggest thing I've seen is the reversal in the biotech stocks," said Peter Coleman, head trader at Convergex. 
 
 "Once you start to get a lift off the lows you're always going to get short covering," he said, noting he remains a "little skeptical" the intraday recovery can hold. 
 
 About 11 stocks declined for every four advancers on the New York Stock Exchange, with an exchange volume of nearly 1.5 billion and a composite volume of nearly 6.4 billion in afternoon trade. Earlier, about 30 stocks declined for every advancer. 
 
 The number of new 52-week lows on the New York Stock Exchange (1,357) and Nasdaq (853) were the most on a single day since November 2008. ||||| Investors have noticed that the stock market has gone through a radical change in the past few months. 
 
 Veteran investor Mark D. Cook, who pointed out red flags a year ago, feels vindicated. Finally, stock prices confirmed what he saw in 2014: We’re in a bear market and about to go over the cliff, he says. Here is a chat I had with Cook over the weekend. 
 
 Why do you still believe we’re in a bear market? 
 
 First, the oil and gas situation is a huge problem, and it will continue. We’re not getting bounces. Instead, oil investors just want to sell. The second problem, and it’s just getting started, is China. China is like an athlete that twisted his ankle and needs time to heal. If the ankle doesn’t heal, it will get worse, and that’s what is happening right now. 
 
 Is there anything technical that you are looking at? 
 
 Yes. First, every rally in a bear market has no traction. In a bull market, rallies will hold for days or weeks. Now we’re getting sharp “one-day wonders” that fail. Every hope is dashed. That is a strong characteristic of a bear market. Second, the NYSE Tick is registering no institutional activity on the buy side. Every rally is a chance for mutual funds to lighten positions. And this is only January. Wait until people look at their January statements. Many will be shocked. 
 
 If this is a bear market, how will investors react in the months ahead? 
 
 There are four psychological stages that people go through during a bear market. Right now, investors know the market is struggling but most believe it will come back. In fact, many see this as a buying opportunity. Here are the four stages: 
 
 Stage 1: Denial 
 
 Right now, we’re in the denial stage. Anyone who is bullish is too stubborn to change his or her view. Many people have their head in the sand, and some may not even look at their January statements. Many believe the market will come back. Right now, many are still buying the dips, which does not work in a bear market. This is similar to what has happened to oil. 
 
 Stage 2: High Anxiety 
 
 In this stage, many investors are like a deer in the headlights. They are frozen and nervous but don’t do anything. They are told by brokers and financial experts to stay calm and don’t panic. We haven’t reached this stage yet. 
 
 Stage 3: Fear 
 
 In this stage, the rampant bulls finally realize they are in trouble. If they have bought stocks on margin, they might be getting calls from their broker to add money to losing positions. In this stage, they are watching in fear as their portfolio burns. They reluctantly start to take action as fear increases. Often they say to themselves, “When my stock gets back to even, I will sell.” 
 
 Stage 4: Panic 
 
 This is what I call the “uncle” stage. This is when panicked investors throw in the towel and take action. They want to get out of the market while they still have something left. At this stage, there is huge downside volume and double-digit declines on the indexes. At the end of Stage 4, many people vow to never buy stocks again. We are not even close to this stage yet. Typically, we hit bottom when investors capitulate after losses of 20% to 50% in their stock portfolios. ||||| U.S. stocks fell Wednesday, but ended well off their lows as investors waded back into the market to buy some of the year’s most beaten-up companies. 
 
 Stock-trading volume was heavy as the market swung back and forth, with 12.4 billion shares trading. It was the highest-volume session since August 24. 
 
 The Dow Jones Industrial Average fell...
– It might be the worst day yet in an already lousy year for the stock market: The Dow was down more than 500 points shortly after noon, a fall of about 3.3%, and the Nasdaq and S&P 500 were down similar percentages. The news comes after yet another bad day for Asian stocks, with Japan's Nikkei falling into bear territory—roughly defined as 20% below a recent high, reports the Wall Street Journal. One huge, familiar factor: Oil prices continue to fall, with the price of a barrel now under $27 a barrel. "Obviously we're in the throes of an environment where sentiment is not positive about risk assets, so it takes very little to put pressure ... pressure coming from falling oil prices continues to serve as a cues for equities to follow suit," a strategist at Janney Montgomery Scott tells CNBC. This MarketWatch piece suggests "the bear market in stocks has finally arrived" for US investors.