Spotting stock market bottom is tough

NEW YORK -- It is probably the most frequently asked question now spanning the globe: When will stock prices stop going down?

With the Dow Jones industrials at a fresh bear market low and down 41% from the peak, it's not surprising the "how low is low" chorus is growing louder. Pinpointing market bottoms, however, is not an exact science.

There is no way to quantify how much panic-driven selling from individuals is yet to come. Or when hedge funds will be done with forced selling related to raising cash for needs such as client redemptions. Another unknown is how much of the coming economic pain is already priced into stocks.

Talk of a bottom has been rising since Oct. 10. That day, the Dow rebounded from a 700-point fall to close down 128 points at its initial bear low. Since then, many signs that have signaled market bottoms in the past have surfaced: record levels of fear; a surge in investor pessimism; and the fact that the Dow and Standard & Poor's 500 index have stayed above their intra-day Oct. 10 panic lows.

But when a definite bottom, or textbook capitulation, will occur is a question. Some analysts who use historical chart patterns and trend lines to determine market direction say prices could go lower. Here are key levels they say could serve as a floor:

•The lows from the last bear. The Dow bottomed in the tech-stock-led crash in October 2002 at 7286 and came close in March 2003 at 7524 — or roughly a 10% to 13% drop from Friday's close of 8379. "It's not inconceivable that we go back and test the lows we saw in 2002 and 2003," says Todd Salamone, analyst at Schaeffer's Investment Research. At those levels, true panic is apt to occur and force all the weak players out of the market.

•The 10-year trend line dating back to 1998. The "big line in the sand," says BigTrends.com chief analyst Price Headley, is a Dow range of 7400-7500 that was first tested in September 1998 near the bottom of the plunge caused by the blowup of hedge fund Long Term Capital Management. This level also held up in the 2000-02 bear.