There is no lack of opinions these days. Bulls say the bottom has been put in place; while bears argue that the market will slide down to new lows. They all have facts and data to back up their theory.
Believing or disbelieving anything is foolish. Blindly follow something can be deadly to your account balance.
The market direction is the result of the collective actions of all market participants. Those actions are driven by the behaviorof all market participants.
He who has a sharp perception of the collective psychology of the market participants will come out on top.
Following is a recent article on experts' opinions about the market bottom.
http%3A//finance.yahoo.com/special-edition/beginning-investing-part-3/give-us-a-sign
Investors are frantically stretching their toes, feeling for a stock-market bottom, but can't find solid footing.
The Dow Jones Industrial Average fell 5.3% last week and is down 36% so far this year. The blue-chip index is off 41% from its record high in October 2007. It was off 47% from that high Thursday, making this the worst bear market since the Dow fell 49% in 1937-38.
At some point the selling has to end. Investors have moved mountains of cash to the sidelines and have started to use it every now and then to hunt for bargains. That suggests to some market watchers a bottom might finally be near.
But how can investors trust that the foundation will be lasting? The bear market is already in its second year, the bottom has been tested and retested repeatedly, and stocks have continually plumbed ever-lower levels.
We went to some Wall Street pros, people who deal with hundreds of millions, billions, of dollars every day. We asked them what they are looking for. What sign? What market signal? What will tell them that the worst is finally over and the market is beginning to recover?
Here are some of their answers:
Brian Reynolds, chief market strategist, WJB Capital Group
Looking for easier credit, lower rates on corporate bonds
Mr. Reynolds, like many other analysts, believes the credit market must improve significantly before stocks can begin a lasting rebound.
Certainly, the flood of money being pumped into the system by the Federal Reserve and other central banks has thawed some corners of frozen credit, especially for banks lending to other banks.
But credit for everybody else is still extraordinarily tight. And that keeps a lid on stock prices.
Corporate-bond yields are critical gauges of credit tightness. Interest rates on bonds issued by companies that credit-rating agencies consider below-investment-grade, or "junk," yielded nearly 20 percentage points -- a record -- above safe Treasury bonds on Friday, according to Merrill Lynch data.
Investment-grade corporate bonds yield nearly six percentage points more than Treasurys, the highest since 1932.
Such high yields suggest that investors believe companies will go bankrupt at levels not seen since the Great Depression.
Many economists still doubt that is the case. In the meantime, however, companies that wish to borrow money still must pay usurious interest rates. Until those yields fall, corporate profits, and stock prices, will continue to suffer.
"Stocks bounce, and bounce hard, in bear markets," says Mr. Reynolds. "Yet we've gotten more ominous signals from the credit market that stocks will eventually put in significant new lows."
Tobias Levkovich, chief equity strategist, Citigroup
Investor apathy, near-zero interest rates
Many market watchers are on the lookout for what is known as "capitulation," or peak panic selling, when the market suffers one dramatic, final swoon that creates a lasting opportunity for the bulls.
They take heart in the fact that the Chicago Board Options Exchange's Volatility Index, or VIX, a closely watched indicator of market fear, last week set a record high, on a day that also happened to bring the stock market's fresh lows. That suggests to some that there was so much panic that a lasting bottom has been reached.
But the VIX has peaked, fallen and peaked again repeatedly this year, with the market later finding new bottoms each time. Mr. Levkovich doubts the final moment of surrender will be quite so obvious.
"We rarely get cataclysmic crescendos of capitulation," he says.
Mr. Levkovich would rather see apathy than fear -- a shift that would cause volatility to fall rather than rise.
Unfortunately, it often takes time and a series of disappointments to create so much disgust with stocks that most investors give up on the market, presenting a better buying opportunity.
Right now, too many people are talking at cocktail parties about all the great buying opportunities in stocks, Mr. Levkovich believes.
And Wall Street estimates of corporate profits for 2009 are still far too optimistic, another sign that hope has not been flushed from the market.
"What I'd look for is more realism on earnings," said Mr. Levkovich. "And then we need very low interest rates, almost zero, to push people back to taking risk."
Robert Pavlik, chief investment officer, Oaktree Asset Management
Thinks a lasting recovery is still six months away
Until last week's market swoon, Mr. Pavlik thought stocks had already found their bottom and were simply stuck in a trading range. Long among the more optimistic market watchers, he had expected the S&P 500 to end 2008 at 1175. But he admits that forecast is highly unlikely now; it would entail a 47% rally in the final weeks of the year.
Like other market watchers, he had taken heart in the market's ability -- until last week, at least -- to repeatedly rebound above its lows for the year. That suggested there was a price at which investors were willing to buy stocks, which typically lures other investors out of the woodwork.
Last week ended that hope -- not only did stocks blow through their lows for the year, but the S&P fell to its lowest level since 1997 and the Dow to its lowest since 2003.
Any bounce from these levels will likely be short-lived, Mr. Pavlik now believes. Investor confidence has been pummeled by the series of false bottoms in the market so far this year. And there is far too much uncertainty about the outlook for the economy and corporate profits for a lasting stock rally.
Mr. Pavlik doesn't expect clarity until after the second quarter of 2009, when corporate profit reports will, he hopes, start to hint at a recovery.
"Something significant has to change in order to get any kind of lasting rally," he said. "Nothing has changed yet."
