One thing that often helps to identify market and sentiment extremes is what I call the crystallizing event. It is usually an event in the economy or the political word that embodies or affirms the reasons for the current level of bearish or bullish sentiment.
Right now there is a lot of bearish sentiment in the markets. Last Friday one of the largest mortgage lenders in the country, IndyMac Bancorp failed and was taken over by the FDIC. Friday also saw a panic by shareholders of Fannie Mae and Freddie Mac. Trading in their shares reached record levels and in early morning trading these stocks had fallen 50% from Thursday's close.
Above this post you see two screen shots of MarketWatch, one taken at 10:45 am ET and the second at 3:01 pm ET. Above those screen shots you will find images of the front page of the New York Times for Friday, Saturday, and this morning.
I think the triple whammy of IndyMac and Fannie and Freddie will mark the bearish extreme of sentiment and of the stock market averages. Things will start to look better from here on.