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Yesterday, we were all surprised to see the Dow Jones Industrial Average fall back below 8,000. The Dow finished down 427 points to land at 7,997. In other words, just enough to freak people out at being below 8,000. Everyone noticed that it hadn't been this low since 2003, nearly six years ago. In other words, if have you spent the last six years putting money away in your 401(k), depending on what dividends you got, you may as well have put your money in a money market fund.

We've got about 450 points to go in 2003. The lowest it got that year was 7,524 in March. In the olden days, 450 points on the Dow would seem like an improbable swing, taking weeks or months. Not so in highly volatile 2008. A 450-point-drop would represent about a 5% drop -- a higher percentage loss than it was just a few months ago.

After that, 2002 has a low of 7,286. To get there the Dow would have to fall 711 points or 8.8% from Wednesday's close. Once that happens, though, the floor drops out. I'm not talking about technical support here, just psychological and historical support. See, if the Dow drops below 7,286, then we're heading into 1997 territory. That's the last time the Dow was below 7,286. If it breaches that threshold, we're heading back to October, 1997, when the Dow was at 7,161.

If that happens, it would mean that a lot of the gains of the late 90s have been wiped out. An entire decade lost. It may be just a number and just psychological, but it will certainly bum me out.

Once again, Dow 8,000 has come back into focus.

For those investors who may not follow indices closely, the 8,000 level has a psychological but not technical support, the latter of which measures such things as the number of investors who are buying / selling, whether investors are committing more money to the market etc.

Even so, right now, a battle is taking place between the bulls and the bears: the bears argue the worst economic news stemming from the financial crisis is yet to come; the bulls argue that the worst news is behind us, and that government stimulus, fiscal and monetary, will get the U.S. economy moving again.

The Dow Jones Industrial Average Wednesday closed below 8,000 at 7,997. If the bears can keep the Dow below 8,000 and then push it through 7,800, then 7,600, it will not be a pleasant time for investors.

Let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment decision / conclusion regarding where the Dow is headed, near-term.

How many days, months, quarters, etc. will this ugly bear market continue? It is just as bad as buying dips on Internet stocks in 2000. The FOMC minutes gave a lowered economic expectation for 2009, like we didn't know that was coming. Housing starts were the worst on record, and now inflation is coming down so hard that deflation is the new damnation of the markets. Does it really matter what gets said anymore? No, it doesn't. Gee, were you even surprised that the deterioration into the close only picked up steam and the Dow shed 5% to close below 8,000 as the S&P decided to close at a five-year low? Sorry there is no good news, but this market is no longer a market.

Citigroup Inc. (NYSE: C) is trading like it is no longer going to be around as its old self. This is truly ugly and unfair, but then again ... who has been rewarded for defending a financial stock? NO ONE. Shares were down 21% at $6.53 before the close.

E*TRADE Financial Corp. (NASDAQ: ETFC) gave pretty decent numbers considering the current climate, yet it is getting crushed every day along with anything and everything else financial. This one was down 17%at $1.03 right before the close.

One hears the mantra almost daily, often from friends and relatives:

Aren't stocks cheap? Look at those low P/Es! GE is at $15 a share, Intel below $14, Du Pont at about $27. My goodness, the Dow is down to 8,200. Isn't now a good time to buy stocks?

It is, if you believe the Dow is forming a bottom and/or that the worst of the financial crisis is behind us, and the U.S. economy is set to recover.

However, the alternate viewpoint argues that the Dow has not bottomed, could very well fall another 1,000 points, with panic selling (known as 'capitulation' in Wall Street circles) taking the Dow to levels well below that, at least for a short period of time, possibly longer.

Hence, purchasing shares for the first time now (or adding to existing positions) given the latter scenario would create an immediate 10% loss, or possibly more.

Monitor corporate earnings and job growth

What's a better tack to take concerning when to buy more shares? Monitor U.S. corporate earnings and job growth.

Whenever someone asks me if a stock can go lower, I reply "of course." As investors have learned the hard way over the past few months, a company's shares can go all the way to zero. Just ask holders of Circuit City Stores Inc. (NYSE: CC) (bankruptcy), General Motors Corp. (NYSE: GM) (near-insolvency) and Sirius XM Radio Inc. (NASDAQ: SIRI) (crushing debt load) whose shares are heading off a cliff.

The number of companies trading at or near their 52-week lows is staggering. Investors are faced with some of the biggest bargains they have seen in decades or the potential to get burned even further as corporate earnings deteriorate further. I am not sure whether to dip my toe further in the market or to invest in more Mason jars that I can fill with the remnants of nest egg and bury in my backyard.

One thing is for certain, stocks are getting cheap. The challenge for investors to figure out is where the market has thrown out the baby with the bathwater. Here are some examples:

• Google Inc. (NASDAQ: GOOG). The largest search engine company is trading at near a three-year low. Chief Executive Eric Schmidt has said the economy is far worse than he expected. The company traded at $307.93, near its 52-week low of $300.52. CNBC's Jim Goldman is baffled by the market's reaction to Google, as am I.
• Citigroup Inc (NYSE: C) has had more ups and downs than Cher. Shares of the big bank last traded at $10.80, near its low of $10.34. It is down more than 63% this year. Remember, sometimes stocks are cheap for a good reason -- like business is bad.
• Kellogg Co. (NYSE: K) reported better-than-expected third quarter earnings and gave bullish guidance. The market, though, could have cared less. Shares of the cereal maker are trading at about $48, near their 52-week low of $45.25. They are down more than 8% this year.
• General Electric Co. (NYSE: GE) has been in Wall Street's dog house so long it should consider a long-term lease. The conglomerate trades for about $17.73. Its 52-week low is $17.27.
• Saks Inc. (NYSE: SKS) already has gotten its lump of coal from investors worried about a horrid holiday season. Shares of the retailer are down more than 77% this year. The stock is trading at $4.66, near its 52-week low of $4.23.

Talk to the stock market's bulls and they argue the Dow is forming a bottom at / near 8,000.

Talk to the bears and they say you're dreaming, if you think the Dow has bottomed at 8,000.

What's the typical investor to do?

Let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment decision / conclusion.

Technical Indicators: Bearish.
Fundamental Indicators: Bearish.
Monetary Policy: Officials are doing everything they can to stimulate growth. Bullish.
Fiscal Policy: More fiscal stimulus should be on the way, in both the U.S. and aboard. Bullish.

Credit Markets: Recovering, but still strained, with still too much interbank distrust / fear. Bearish.

Geopolitical Risk: On average, it's about the same as it has been during the past 3-5 years. Neutral.

Conclusion: The view from here argues that the outlook for U.S. stocks / stock market is bearish at least for the next six months, and most likely for much of 2009. Further, if Dow 8,000 doesn't hold, the market could fall much more, particularly after 2009 earnings estimates are revised downward, as they are expected to be.

Money manager and advisor Jim Stack, who accurately sidestepped the bear market over the past year, is now turning more optimistic. Here's the latest from his InvesTech Market Analyst.

"As a bear market unfolds, investor emotions travel down a slippery slope of anxiety, fear and panic. And it is just this kind of emotional upheaval that creates some of the extremes that we are seeing now.

"Media headlines containing the word 'depression' and images like this are appearing more this year than in any year since the 1930s.

"Stock market volatility, as measured by the number of 1% daily closing moves in the S&P 500] Index, is near a record high. The percentage of stocks on the NYSE hitting new 12-month lows is higher than any previous record level during the past 50 years.

"Yet, bear markets bottoms occur right in the midst of fear and panic – at the point of maximum gloom. And for consumers, it's hard to get much gloomier: In addition, more bear markets have ended in October than in any other month.

The Dow lost 385 points this week with a 315 point election day rally on Tuesday, two consecutive days which totaled 929 points down, and a Friday rally of 248 points. Did the market rise on hopes of a McCain upset only to fall due to disappointment that Obama won? Did the market rally Friday because the 6.5% unemployment rate was not as bad as expected? It could be, but I doubt it.

More likely, the markets are moving because of the trading behavior of endowments, pension funds, and hedge funds. They make decisions for very different reasons. But some reporting on daily market movements looks like a joke -- nobody knows why the market goes up or down, but commenters use price movements as a daily barometer of the national mood. So how do endowments, pension funds, and hedge funds move the markets? Here's how:

• Endowments. Big university endowments, such as Harvard's, are desperately trying to unload billions of dollars worth of illiquid interests in venture capital and private equity firms. Harvard is reportedly trying to dump $1.5 billion worth of such interests into a market where there is likely to be very little interest. Not only that, these private equity firms are demanding that endowments fork over the money they committed to them so they can make new investments. And with the S&P 500 down 36.6% so far this year, many endowments are selling anything liquid to meet these commitments and to pay shorter-term obligations -- such as paying professors and keeping the lights on.

The epic battle between the stock market's bulls and bears continues. The Dow Thursday registered yet another difficult day, down 443 points to 8,695.79. It seems like just a couple days ago the Dow was above 9,600. No, wait, that was just a couple of days ago!

Don't be swayed by a mild market rally today: the Dow has declined about 10% in two days, and a mild rise could be merely short covering ahead of the weekend.

From a technical analysis standpoint the view is not pleasant as the Dow is well below its 50-day and 200-day moving averages. There's not enough buy side pressure to propel the Dow higher, but the Dow is still not oversold, with a relative strength index (rsi) of 42.

Further, the fundamentals picture does not look any better. Declining earnings and zero job growth -- the U.S. economy lost another 240,000 jobs in October after losing a revised 289,000 in September - are the main reasons yours truly has taken pains to underscore that if the Dow can hold 8,000 by the time 'normal' credit flows resume, that will be a moral victory.

I have long been a big believer in the idea that the daily fluctuations in the stock market can't be easily explained.

That doesn't stop people from making sage sounding comments about how the market fell 486 points today due to bad economic statistics -- like the ones we had today on contraction in service sector employment. But by that same logic, the market should have tumbled yesterday as well, thanks to bad retail sales, employment and auto sales numbers on which I posted -- and yet the Dow rose 306 points yesterday.

This got me to thinking about a possible explanation. There's nothing so fun as a good conspiracy theory. What if the Treasury was using its money to help prop up the market in the days preceding the election? My mind then leapt to a possible rationale: Perhaps it reasoned that since the collapse in the markets had helped Obama, a rise in stock prices would work to the advantage of McCain. Aha! It would certainly have looked better for the current administration if it could have been succeeded by another Republican in the Oval Office. If that was the intent, it didn't work too well.

Of course, just as there is no evidence that economic statistics -- or the election -- have anything to do with the market moving one way or the other, so it is difficult for me to find any evidence that the Treasury was funneling cash into the markets to prop it up. Oh well.

In all seriousness, I believe there is a fundamental lack of transparency if there is no credible basis on which to explain why the market moves every day. If the big buyers and sellers of stocks publicly disclosed their moves, then it might be feasible to explain them.

That does not seem to be on the horizon, though. So people will continue making their illogical explanations for those daily price swings.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

The market, which to say the least has not been kind to 401Ks lately, rallied during Tuesday's morning session, with the Dow up 270 points to 9,591 at mid-day.

What's driving it? Is this an Obama rally or a relief rally?

Economist Peter Dawson, who took his daughter Laurie to the voting booth Tuesday morning for "a cool, local civic lesson," tends to side with the latter.

"Given the economic, fiscal and, let's face it, financial system challenges facing the nation, and the intensity of the presidential campaign, my sense is that the market and nation are probably just happy the campaign season is over," Dawson said. "The market knows that one way or another, we will have a new chief executive in place, which means decisions will be made to tackle those problems and the market may be getting out in front of that."

Economist Richard Felson agreed with Dawson but argued that the expected performance of U.S. Sen. Barack Obama, D-Illinois may also be playing a role.

October 19, 1987 was the day that the Dow fell a record 22.6% -- then a record 508 point decline. (The Dow lost a total of 21.8% during that month). By contrast, the current month is on track to end down a relatively modest 16.6%. But even though the Dow went down much more in October 1987 than it did in October 2008, it turns out that the 1987 crash preceded the economic contraction by about two years. By contrast, the October 2008 crash seems to be happening at the same time as the economy implodes.

I remember the October 1987 crash well because I was working in a consulting firm whose CEO asked a colleague of mine to come up with a list of stocks to buy. He was convinced that the 508 point decline was an anomaly that did not reflect the state of the economy. And it turns out, he was right. The 1987 crash seems to have been caused by a computer based trading program that got out of control.

By contrast, when we look back on the current economic and stock market downturn, we may see the peak as having taken place in the summer of 2007 -- that is about the same time that the Dow reached its high above 14,000 which took place in October 2007. Unlike in 1987, I would be surprised if that consulting firm's CEO told one of his people to find him stocks to buy after stocks tumbled this month.

In that sense, even though the market suffered much more in October 1987 than it did this month, I would not be surprised if the current market downturn presaged a much more painful economic contraction.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Like most married men with a newborn child, economist David H. Wang's nights and weekends are filled with baby care, and diapers galore.

"And telephone calls," Wang said.

Telephone calls?

"Frantic telephone calls from family and friends in China," said Wang, who grew up in China before moving permanently to the states in 1989. "They all want to know, 'should I sell this stock here?' or 'sell this mutual fund?' or 'get out of the market entirely?' Compared to dealing with these calls, baby care is easy."

You can understand why Wang's family and friends may be nervous and seeking his advice. The S&P 500 is on-pace to record its worst monthly point decline ever (but not the worst percentage decline ever), CNNMoney.com reported Friday. As of Thursday's market close, the S&P 500 had fallen 204.8 points this month. Meanwhile, the Dow had dropped 1,669 points, or 15%, as of Thursday's close.

And what were the worst percentage declines ever for S&P 500? You guessed it: the worst occurred during the Great Depression, two years after the stock market crash in 1929: in September 1931, the S&P fell an ugly 29.94%, CNNMoney.com reported.

The second-worst percentage decline? October 1987, when the Black Monday crash occurred: the S&P plunged 21.76%, CNNMoney.com reported.

Global stock markets hammered, as well

Further, this October will also go down in history as one of the worst months for foreign stock markets. The October swoon has added to what can only be diplomatically described as a difficult year for foreign stocks. So far this year, several foreign markets have recorded losses greater than 30%, and many are at multi-year lows, FT.com reported Friday. The Japanese, South Korean and Hong Kong stock markets have all lost half their value this year. European stock markets are down 45% in 2008, including a stunning 40% decline in the U.K.'s FTSE 100, known as the "Footsie 100."

It is Black Friday? It depends on who is asking and who is answering. Some people think it is the day after Thanksgiving which is a litmus test for how retailers will do for the holidays.

For stock market experts, October Fridays are reminders of the days that the markets crashed in 1987 and 1929. Of course, that is a false notion. The market collapse in 1987 came mostly on a Monday. when the DJIA was off over 22%. In 1929, most of the collapse came on a Thursday.

What does it matter? Friday conjures up images of being dark, falling at the end of the week and all. October is when its starts to get cold in the northern tier of states. No one likes that.

Not much is likely to happen on Friday, October 31, 2008. The market has already reacted to a rate cut by the Fed. The news of the financial bailout for banks is old now. Third quarter GDP numbers are one day into the past. No major companies release earnings on Friday. They assume everyone has left for the weekend.

It is nice mythology to have a day to focus on, an evil and cursed day. This year, the market will probably not close more than 1% point up or down.

Give it a rest.

Douglas A. McIntyre is an editor at 247wallst.com.

In this market, it bears repeating that a great deal can change in a short time.

That's why from an investor standpoint, the Dow's level really doesn't count until 4 p.m. ET.

Of course, traders will quickly point out that intra-day and hourly overbought/oversold indicators certainly count, and if you're in that category of market participants who trade daily with success, congrats.

But for the bulk of investors/readers a longer time horizon is relevant, and that's why it's not prudent to read too much into the Dow's level before the 4 p.m. close.

With the VIX, the Chicago Board Options Exchange Volatility Index (NYSE: $VIX.X), the benchmark index for U.S. stock options, at record highs, the stock market is displaying near-unprecedented volatility - - or wild gyrations characteristic of periods permeated with fear, uncertainty, and announcements events that change economic forecasts, almost daily.

Typically trading between 15-30, the VIX has been above 40 for about a month, and has traded above 80! On Thursday at 11 a.m., the VIX was at 66.38, down 3.58.

And the VIX's expression in Dow terms? That's right: massive swings in the Dow -- 500-point reversal moves intra-day, 700-point up days followed by 800-point down days, other wild swings, 5% up days in a 10% down month, and of course, the old ulcer-generator -- massive selling at 3 p.m. ET.