Have the Stock Markets Bottomed Yet?

Are the Dow closing of 8175.77 on Oct. 27th, and the session low of 7773.71 on Oct. 10th, the bottoms? Or will we see further capitulation over the coming weeks and months?

That depends on the overall psychology of the markets. If people have already accepted that we are in for a prolonged recession, then maybe we have seen the worst of the lows. I doubt there are too many investors out there who haven't yet come to the conclusion that we are in for at least several months, but more likely 1-3 years, of slowed economic times.

What could send things tumbling back to those lows, or worse? We've already seen a number of institutions fail...institutions that were a mainstay of Wall Street and Main Street. There may be more, but the shock is likely over. Credit markets are slowly unfreezing as countries around the world address them with bailouts and interest rate cuts. But if they freeze up again, and if more large companies fail, the bottoms could be tested again.

We are also beginning to see job cuts hitting hard. American Express today announced 7,000 job cuts. There have been many others, and there are many, many more coming down the road over the next few months.

The critical question will be whether investors the world over have already resigned themselves to the fact that economies are slowing, jobs are going to disappear for a while, and earnings will be dismal over the next several quarters. 

If no more big surprises hit that investors aren't already expecting, and we should already be expecting the worst, the markets may have seen their bottoms. Let's hope so.