The market appears to be approaching an intermediate low shortly.  There have been three waves down from the last bull market high and we currently are in wave 5 of the last wave.

 And within this 5th wave we appear to be forming an ending diagonal or descending wedge formation

The ending diagonal is one of my favorite technical formations because price tends to break out of the pattern in the opposite direction of the triangle and tends to move fast back to the start of the formation. This suggests a final down move to around Dow 7000 (the pattern is also in the Dow) and a final low near the start of December with a quick 2500 point rebound over the next 2-6 weeks.  Just a word of caution, the very last wave of a down move can be very unpredictable, sometimes it will truncate and not hit a new low and other times can be the worst part of a downswing. The main point is we appear to be near the end whether we drop a few hundred points or drop into the 6000s before the end of the month.

What is some of the evidence for a low.

1) Most market averages are in the range of their 2002/2003 lows, this should offer strong support, at least for a bounce.

2) At the last low the market has retraced about 50% of the secular bull market from 1980, another common place of support, at least for a bounce.

3) The Ten day Trin index (a good measure of panic) has been above 1.5 for almost a month, a level historical associated with good intermediate lows.

4) a number of internal positive divergences have been showing up since the Oct low in the number of stock making new lows, in the McClellan Oscillator, in the equity Put/Call ratio is a bottom levels, in the Swenlin trading oscillator, in the short term volume oscillator, the daily santo4 index, and  the number of bearish advisors (I know the more bearish the advisors are the more bullish the outlook but frequently there is a divergence in advisor sentiment between the market internal low and actual low).

5) Sentiment is rapidly getting very bearish with the constant calls of time to buy, you can't lose money over the long term, and other calls of that type diminishing rapidly.

Even though technically it appears an intermediate low is close at hand, there is a caveat. 

The market is falling because of a debt collapse, money is disappearing in the markets and money trumps technicals. The market is based upon supply and demand and if the collapse in assets continues so does the market.  When we do form a low the following up move should have a lot of power behind it,  we should see a day with over 90% of the volume to the upside, followed by a strong second or third day, sometimes we haven't seen in a while.  Another thing to watch is the ending diagonal, it might break down on the wrong side of the triangle it occurs about 80% of the time), a little fake break down is common also known as a throw over, but a breakdown of large size or time suggests the market is still too weak to create a meaningful rally.  The ending diagonal needs to break to the upside to confirm a counter trend rally.  In other words don't jump the gun, use some form of confirmation of an upturn.

In summary, I am looking for a low before the end of November which should last a few months and should be the most powerful counter trend rally of the bear market, either in size, time or both.  Sometime next year the market will break down again for the final leg down into mid 2010.  If you only invest for the long term, this next intermediate up turn will be an opportunity to get out and not an opportunity to get in.