When bubbles burst, markets tumble. Sometimes the tumble is long and pervasive. Other times it’s a fast a furious free fall. Whatever form a market crash takes, it will eventually end and the market bottoms.

What follows is a set of common indicators that the market may be at or near a bottom.

Extremely pessimistic market sentiment.

Mega bottoms include everyone of the following, but more standard bottoms can exist with some, but not of these conditions having been met:

Market woes are all over the non-business headlines.
Market woes are always on the cover of the financial papers, you’re looking for the USA today and local/regional news. When you cannot escape the economic gloom, you’ve met this indicator.

The “Investors intelligence survey of money managers” is decidedly bearish.
The “Investors intelligence survey of money managers” is a survey given by Investors Intelligence, and it often acts as a counter-sign. Meaning, when the survey turns bearish, the end may be near. You’re looking for less than 40% bulls. It can usually be found in Thursday papers or at the Market Harmonics web site.

Mutual fund withdrawals increasing.
When investors are steadily withdrawing their money from mutual funds for at least 2 months, then consider this indicator met. You can check out this data at  AMG every Friday.

An increase in the VIX.

The ^VIX (CBOE VOLATILITY  ) is a measure of stress in the financial system. If the VIX is over 40, then panic is present in the investment community and usually accompanies a bottom. The trick is knowing how high it will go. For example, the 2008 crash saw a spike in the VIX of 80 in the fall of 2008, yet the bottom was still months away.

The Meisler Oscillator indicator.

I know, it sounds a lot like the flux capacitor that powered the time machine in Back to the Future, but this indicator is actually a measure of how over-bought or over-sold the market is. When this indicator reaches -5 or lower, more people have sold than are willing to buy and a bottom may be near. This is the only indicator on this list that isn’t free, but you can get some info on it at The Street.com and Investopedia.

Capitulation.

Once investors become pessimistic and see little hope, capitulation follows. This is seen as a crescendo sell off. Psychologically, it’s the final purging of those who are willing to sell and it is required fro stocks to start rising again. It brings out the bears and bottom feeders looking for a bargain. Crescendo sell offs present themselves as an increased ratio of new lows to new highs. You’re looking for something in the ballpark of 500 or 600 new lows and only a handful of new highs.

Catalyst.

Once the pessimism has set in, and the purging has taken place you need a catalyst to start the process again. Without a catalyst, you’d have stagnation at the bottom. It makes sense, right? All the people sick of investing have taken their money off the table, and there’s no reason to get back in.

At this point, you’re looking for what will make the market rise again, and you may not know it until it’s happened. Meaning – don’t try to time the catalyst! Work on recognizing the bottom, and get back in to be ready when the catalyst appears and the market recovers.

During more normal times, the catalyst is often the Federal Reserve cutting rates. But these are not normal times, and who knows what the catalyst will be this time.

Bottoms are a natural part of the stock market, just as are peeks. But if you can learn to recognize each, and use the right techniques and discipline, they can become your best friend.

• Top 5 Best Investors. Here are the top 5 Investors of all time, as picked by  Investopedia. But first, the criteria... The list is based on 4 factors: The investor is a long term performer - that is one with a long history of beating their bench mark index(es). The investor or manager must......
• Morningstar Announces Their Best Fund Managers of 2009! Morningstar has released their picks for Best Mutual Fund Managers of 2009. It's important to remember that the competition is intended as an acknowledgement of past achievements, not as a recommendation for future performance.. That being said, the rankings are determined by a number of factors, not just best return......
• 3 Tips to Make Your 401(k) Work for You. Morningstar has a terrific article (available to free members) titled Three Tips to Make Your 401(k) Work for You and I love it! Here's a brief sample of why: It's surprising there aren't many calls in the press to ditch the automobile. After all, think of all the dumb things......
• Mutual Fund Monday - What 2009 Trends Mean for 2010. Many investors take the change in calendar year as an opportunity to assess their portfolios and the future, and hopefully get their portfolios aligned with the future direction of the stock market. One way in which to do this is to look back on the year that's passed and see......
• Investing Term Tuesday - January Effect. In honor of just closing the books on January, I thought it might be nice to examine the January Effect. The January Effect is an investing term that refers to a general increase in the stock market during the month of January. This effect is typically attributed to an increase......

• Why Using Landing Pages By Themselves Will Increase Your AdWords Budget Why Using Landing Pages By Themselves Will Increase Your AdWords Budget   Google AdWords, or any other kind of contextual advertising for that matter, is about one thing: getting a return on investment. Businesses of all types, from multinational corporations to sole proprietorships' selling machine parts to real estate agents......
• Is that a light I see? Rally or Trap? Every investor currently in the market has been pleasantly surprised with the 1500 point increase (as of this post) we have enjoyed over the last seven weeks. Many are beginning to whisper ever so quietly around the water cooler about the end of the Bear Market.......
• Book Review: The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich By David Bach David Bach is well known for his books, Smart Women Finish Rich and Smart Couples Finish Rich and in this latest effort, he goes into more detail on the techniques he discussed in these books. While the title would make you think it’s yet another get rich quick scheme, it......
• Alternative Income Streams - June 2008 Due to my recent vacation, I was unable to compile numbers of my alternative from May until today. So while I typically like to get this out on the first or second day of the month, here we are in the 9th day. Once again, my alternative income continues it's......
• What About LOR-Lazard World Dividend & Income Fund? When I first heard about LOR, I thought it meant Lord of the Rings, but no, the topic was on Lazard World Dividend & Income Fund(LOR). I got this email from a reader: I love your blogs. Please tell me what to think about an odd stock - LOR. They......