While stocks have bounced back from their most recent lows, there's little optimism that the market has found a lasting bottom.
Instead, most analysts see the market retesting those lows well into 2009.
A short-term rally could carry the market up to—or even through—the holidays because technicians say stocks are simply too oversold to make a straight line lower. But instability in the auto industry, combined with rising unemployment and consumer weakness, will doom the market to mediocrity at best, experts say.
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"I am much more concerned that we may have a long period of stock market lethargy...until there's some visibility as to how deep the recession is and how we get out of it," says Peter Tanous, president of Lynx Investment Advisory in Washington, D.C. "The market is going to be faced with much more bad news than good news. In fact, it's very hard to think of any good news that can come out except that stocks are very cheap—and historically they are."
Market pros have been searching for a bottom ever since the implosion of Bear Stearns last February. As recently as last Thursday, a sharp rally—when the Dow Jones Industrial fell below 8,000 and then rebounded violently—had some thinking the market had finally reached capitulation.
But with General Motors (NYSE: GM) appearing to be on the brink of capsizing, analysts say there's still too much worry to call last week's rally a turning point.
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"That's another big black hole," Tanous says. "The idea that a company that was the largest company in the world a couple decades ago is now teetering on bankruptcy and has a market cap considerably smaller than Starbucks (NASDAQ: SBUX) is a major turn of events. The markets are worried about it and that's perfectly understandable."
And uncertainty, as one of the market's oldest maxims goes, is what Wall Street hates the most.
"It's very, very clear that short of breaking that bottom it's going to be choppy and we're going to be testing and testing," says Quincy Krosby, chief investment strategist at The Hartford. "You've got to see some kind of strong rally, even if it's a rally that dissipates, but we're not seeing that. It's as if the market wants to go and break that support, and perhaps it needs to."
In a normal year, November and December are months when investors pile into the markets. The holiday season usually provides plenty of opportunity for stocking-stuffer stocks as investors look to shore up their portfolios.
This happens even in extremely lean years like 2001, when the market cratered after the Sept. 11 attacks but rebounded 10 percent from Nov. 1 to the end of the year.
But this year, with all its credit-induced panic and economic barometers clocking in at historic lows, the rules have changed.
"If you really are a true long-term investors who's prepared to go in and not look for five years, most likely you're going to do well buying top-quality stocks," Krosby says. "Market leaders, clean, strong balance sheets, dividends, best of breed—these companies are going to do very well. In the short term, no. This is one where you've got to stick to your guns and not look."
That mindset is widespread, though some advisers are taking short-term positions in the market to capitalize on what they see as a quick bounce.
Video: Peter Costa of Eckhardt says the Dow 8,000 may hold.
While Matthew Tuttle, president of Tuttle Wealth Management, is playing the S&P Depository Receipts (AMEX: SPY) exchange-traded fund, he said it's not something he'll be sticking with for more than a few weeks.
In fact, he thinks the retest of the lows may go beyond testing the October 2008 level and tumble all the way back to the 7,286 mark of Oct. 10, 2002.
"Just the fact that I think we're probably a little oversold here we wouldn't be surprised to see a bounce. But I think any bounce would be purely technical," he says. "If not sooner, then certainly by sometime in December we're going to retest those lows again."
For guidance, many market pros are looking for direction from institutional investors, which have been heavy buyers in the current market, and for when hedge funds are able to get back in the game. Fund managers have been liquidating accounts on a wave of redemption requests
At the same time, the market is watching every step from President-elect Barack Obama, whose post-election statements have taken a cautious tone and led some to believe that he may be more Wall Street-friendly than his campaign rhetoric intimated.
"You have to be alert of whether we get a surprise to the upside somewhere next year and the market starts to take that into consideration, or we can get surprises to the downside. It's going to be hard," says Peter Miralles, president of Atlanta Wealth Consultants. "The market is a leading indicator. If we can break out of this range, break out over something like 1,000 on the S&P and get something going there, that would be a great sign."
Until then, Miralles is playing it safe as well with a focus on defensive stocks like consumer staples, health care and utilities.
"There's no leadership out there in the market yet," he says. "Until we start to see the more economically sensitive stocks--financials and the retails and some consumer durables--really start to make some outperformance, we're still trying to weather the storm."For more stories from CNBC, go to cnbc.com.