There are two types of bottoms here. One is a short term bottom in the context of a bear market (a.k.a. bear market rally), the second and only useful one to us is the bottom and the end of the bear market, the start of the new bull market. Realistically speaking, since we are barely 1 month into a bear market it's highly unlikely that a new bull market is going to start up again very soon. Time estimates for that range from 6 months to 2-5 years.
So what signs should we look for to spot the end of this bear market and the start of the next bull market? Here are the conditions I will be watching for in order of significance:
Credit markets return to normal. This is the big one. Watch for TED spread to decline, corporate bond spreads to tighten, personal and business default rates to drop.
End of government bailouts and special central bank activity, which should not be necessary in a normal economic climate.
Money market and bond issuance rising, indicating market appetite for debt
Reducing volatility in bond and stock markets (bonds being more important)
Technical strength returns to stock market averages; they are able to hold above their 100 and 200 day moving averages most of the time.
It's important to note that stock markets are the least important here and they are lagging, not leading indicators. Credit markets (bonds and derivatives) began crashing a full year before stocks even tumbled.
- Perpetual Bull
UPDATE: (June 2009) There have been signs of improvement in credit markets and declining volatility. These look positive, but government bailouts and special central bank activity persist, indicating that the financial system is on life support and not able to stand up on its own. Also, default rates continue to rise and loan quality is not yet improving. In Canada, bankruptcy rates are marching steadily higher to alarming levels.