Last Tuesday's massive market sell-off was a real doozy. The Dow Jones industrial average dropped 416.02 points (3.29 percent), the Nasdaq Composite plunged 96.65 points (3.86 percent), and the S&P 500 fell 50.33 points (3.47 percent). In fact, at one point in the afternoon the Dow was actually down a jaw-dropping 546 points. All three averages are now in negative territory for 2007, despite an extremely robust first six weeks of the year.

What was truly amazing about Tuesday wasn't the percentage losses - these paled in comparison to the 22.6 percent drop on Oct. 19, 1987 (appropriately dubbed Black Monday). Instead it was the breadth and intensity of the selling. All 30 Dow stocks were in the red, as were a whopping 497 of the S&P 500. Add in record volume on many of the exchanges and some NYSE system malfunctions and it made for a pretty remarkable day.

Theories abound as to why this happened. Some people believe the cause was a nearly 10 percent overnight decline in the Chinese stock market, which had been trading at historic highs. Others contend it was a reaction to weak economic numbers, the anticipated unwinding of the Japanese yen carry trade, a realization that the subprime credit market debacle could spill over into the rest of the financial sector, or even a delayed response to statements made the day before by former Federal Reserve Chairman Alan Greenspan that the U.S. economy could slip into recession later this year.

While any one of these could have been the match that ignited the blaze, the real culprit was the extreme level of complacency in the U.S. and world equity markets. Things had simply been too good for too long, and the markets were poised to fall. Whether it was China, the U.S. economy or Greenspan, something was going to trigger a sell-off. The question now isn't what caused the meltdown, but how do we deal with the mess?

It's tempting to anticipate a quick rebound. After all, the global economic backdrop remains fairly strong, and historically these types of massive market declines are relatively short-lived. That could certainly be the case again, but I doubt it.

Fueled by a seemingly inexhaustible combination of ample liquidity and market gains, investors had - until Tuesday - become almost oblivious to risk. Credit spreads and market volatility were at historic lows, and investor sentiment - as measured by hedge fund net-long investment levels and investor surveys - showed an almost giddy anticipation of higher stock prices. I think Tuesday signaled a turning point in the character of the market from giddy to guarded.

If so, it will take longer than most people expect for the markets to resume their upward march. There are undoubtedly plenty of investors with sizable gains from the past eight months who are going to hit the eject button if the market bounces. That overhead is going to make it very tough for the markets to quickly rebound, and expecting them to do so is a triumph of hope over reason.

Instead, like the correction last May, this one won't end until we see some extreme pessimism enter the markets. That may happen over the next few weeks, or it may take several months. Until then, we'll likely see a shift in investor interest from risk to capital preservation, along with a material increase in market volatility. This is not an environment that will reward heroism, but I do believe it will ultimately reward flexible and patient investors with a very good buying opportunity.

David A. Twibell, J.D., is president of wealth management for Colorado Capital Bank, where he directs the bank's portfolio management and wealth advisory practice.