Even With the Selloff, Market Still Seeks Bottom

Earnings

If an early earnings snapshot is any clue, corporate profits seem to be right around already-lowered expectations. But several large firms, including Dow bellwethers Dupont and Caterpillar , are warning of tough times ahead, which contributes to the uncertainty of whether a bottom has formed for stocks.

In fact, many analysts say third-quarter earnings are almost an afterthought—save any big surprises either way--and fourth-quarter earnings will provide the real clue as to whether the worst has passed.

"If the credit markets don't get freed up, the earnings for the fourth quarter are what scare me the most," Pendergraft says.

But part of the strategy for corporations now could be decreasing outlooks so as not to watch their shares get hammered if the quarter is a bad one.

Art Cashin of UBS talks about a market bottom in video at left.

"If you lower expectations now you're not going to get hurt that bad because everybody else has kind of priced this in," Pendergraft says. "Corporations are lowering the bar for themselves and taking advantage of the environment that they're in."

Credit card companies American Express , which already reported positive results, as well as Visa and Mastercard will provide more clues to credit, consumer and corporate health.

"August, September and October are (traditionally) just difficult months," Miralles says. "We're now heading into the best months of the year. The calendar is with us for a little bit of a rally, and we just need more time. We need to get some earnings behind us to see how everybody's doing."

Conviction

Judging by volume levels, longer-term investors essentially took the summer off, leaving market gyrations in the hands of traders and hedge funds.

Those foraging for a market bottom are waiting for those with further horizons to get back in to show belief that things have calmed down and the water is safe again.

"On Monday it was a 900-point day, but it still is the case that when the market is lower, volume is higher than days when the market is up," Sparks says. "What I would be looking for to suggest that we've made a volume is a lessening in volatility, more good breadth and more volume on days when we go higher."

The upshot for the search for a bottom, then, may not offer much consolation.

"Time," is Miralles' one-word answer to what it will take to know if a low has been reached.

Likewise, Sparks says there will need to be a continued series of positive signs to indicate that Wall Street has successfully weathered its latest--and arguably its most vexing--crisis.

"I don't think you're really out of the woods yet with respect to the volatility and the downtrend that we've seen," he says. "We can't look out ahead and see much light on the horizon."

© 2012 CNBC.com

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