Markets will ALWAYS hold opportunities for us to make or lose money.  There is no “all clear” sounded when, once again, it will be safe to get back in the market. But here are a few things we should all be looking for as signals that better times may be coming.

First, remember taht markets turn before economies.  So, for example, don’t think that awful unemployment numbers will get better - or even stop getting worse - before markets move up…

up, when news merely gets less awful (not necessarily “good,” mind you), then less bad, then not so bad, then mildly good. In fact, when bad news flows on a given day, and the market does not tank (and we’ve seen some of this in recent weeks), that’s an encouraging sign that a bottom may be near. In other words, for those waiting to hear a constant stream of dramatically good news before they invest, by the time that comes, markets will long since have gotten a whole lot better.

I’d also point out that when a bottom has arrived, volatility will retreat (of course, before it spikes again on the way up). And volatility has come down, too. In Oct., Nov., and Dec. of 2008, market volatility went from being historically horrific to just plain bad. That was an improvement, even if only on a relative basis.

But, then,  Jan. of ’09 has been just terrible, on the other hand, in its negative returns and in a clear pick-up in market volatility.

Lastly, while there’s no precise way to measure it, extreme bearishness is a good clue that the market has hit bottom. After all, when all the bears have sold, there’s nothing left but upside opportunity. By definition, the moment of maximum bearish sentiment is coincidentally the moment of greatest upside potential.

Again, there aren’t precise measures of bearish sentiment, but in my opinion, right now, I’ve never lived through a time when there has been more predictions of gloom and doom.

Hmmm…that may mean we’re actually near a bottom.

Tags: 401(k) investing, 403(b), hope, retirement investing