If the Real DOW overshoots as much as it did last time the stock market reflected a relatively minor debt deflation, we are only about half way through the correction.
Keep in mind our Real DOW is, well, real – that is, inflation adjusted; during the previous debt deflation bear market, stocks declined rapidly in nominal terms then in inflation-adjusted terms. Note that in Real DOW terms, the entire 1966 to 1983 period appears as one continuous bear market, first disinflationary then inflationary. Likewise, the more extreme debt deflation bear market that started in early 2006 during the inflationary weak dollar period and continued into the disinflationary period that started at the end of 2008; in Real DOW terms, the decline is continuous.
There are several ways that the DOW can go on to the queasy lows shown above. One way is for inflation to rise and for the DOW to fall only moderately further in nominal terms. We might, for example, see the DOW fall to 5000, our long-term DOW target, while inflation rises into double digits as occurred between 1975 and 1980, in early 2012. But that's just a guess, of course.
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