Top Five Signs a Market Bottom May Be Near

The stock market has been absolutely horrible in the United States as well as the rest of the world in the last couple of months. More specifically, in the last couple of weeks alone the market has lost more than 20% of its value. It is absolutely amazing that so much wealth can be lost in so little time, but that is exactly what happens when we come upon a financial crisis like no one has ever seen. The market hates uncertainty and there is enough uncertainty right now to drive a person crazy. When will the relentless slide in housing prices end? When will banks start lending to each other again and lending more freely to small businesses and the consumer? How on earth will the consumer hold up through all of this? What else can the government possibly do that might actually work to help fix this financial crisis? All very valid questions that truthfully have no real answer, which is precisely why the S&P 500 is now down a stunning 42% in just one year. Having said all of that, let's try to take a little bit of a positive look at things and see five reasons why we could be close to a bottom.

5. Gas prices are falling like a rock- The price at the pumps haven't even come close to reflecting the fact that unleaded gasoline futures are now trading at $1.97 on the open market. Once they start to reflect that and we start seeing a lot of pumps with gas around $2.70 that should do quite a bit to help the consumer have a little extra money, which they so desperately need. This isn't the answer to our problems for the consumer, but it sure will help some.

4. Fed and Treasury are both very active- Most people point back to the Great Depression and ask if this is another of the same. It could be, but it more than likely won't be because the Federal Reserve and the Treasury Department are both actively doing quite a lot to try to stabilize these markets. We have learned a lot from the carnage from 1929 through 1932 and Ben Bernanke understands he can't let that happen again. There is only so much they can do, but still this has to be considered a positive.

3. The covers of all the magazines and newspapers- We have hit the point where the stock markets are now on the front page of every magazine and newspaper constantly. For many years this has been quite a good indicator that the bottom is nearby. Once main street starts saying its the end of wall street, wall street generally finds a bottom pretty soon.

2. There are still plenty of healthy companies- Sure the financial companies have pathetic balance sheets and some of the consumer names will get crushed by slower spending, but there are still some very healthy companies that have a ton of cash and a very healthy balance sheet. Even these companies are being trashed right now by the stock market, which is definitely in shoot first and ask questions later mode.

1. Sentiment has gotten horribly low- Sentiment among investors is ridiculously low. We have reached the point where many people believe that stocks are simply worth virtually nothing it seems. Certainly there are some that are worth virtually nothing, but as an index this is clearly not true. Volatility spiking to never before seen levels also shows just how scared the market is. A very negative and scared investor who panic sells generally does so much closer to the bottom than the top. This is one of the best contrary indicators anyone has ever found and it is screaming that stocks are oversold.

These reasons do not mean that this stock market is going to bounce back in a big way anytime soon. The economic situation right now is terrible and the markets will have to deal with that for quite some time. These five points are important to remember though before you go liquidating all of your investment positions and look back five years from now and kick yourself for it.