Earlier this year, investors bought into the global growth story wholeheartedly. Now they are less sure. Doubts and fear are creeping in.

The way contrarians look at the situation, this is actually a positive development for the U.S. market, which is now officially lodged in bear territory.

The Standard & Poor's 500 stock index dropped into bear country on Wednesday, joining the blue chip Dow Jones industrial average, which last Friday hit the 20-per-cent decline from the high that marks a bear market, and the tech-stock-laden Nasdaq Stock Market composite, which has been ruled by bears since mid-March. Both the Dow and the S&P 500 set 52-week intraday lows yesterday before recovering somewhat.

"A few key indicators are starting to suggest that investors are getting much more worried about market developments, which is an important signal for market repair, although not everything is turning positive quite yet," said Tobias Levkovich, chief U.S. equity strategist at Citigroup Global Markets Inc. He noted that the VIX index - a measure of U.S. market volatility that is seen as a proxy for investor nervousness - now stands at a much higher level than it usually does.

And the latest Investors Intelligence survey of investment newsletter writers shows bearish sentiment matching the high levels seen in March, when the markets were also very weak. "While a single survey is not likely to turn the stock market around, one can take some solace in the data, as it shows that fear is beginning to emerge again," Mr. Levkovich said.

But he and others aren't ready to say that sentiment has deteriorated so much that investors are basically throwing in the towel, thereby setting the stage for a market bottom - although there is some reason for optimism on that score, as well.

Dennis Gartman, publisher of the influential Gartman Letter, sees some signs of that already. "We are now entering that capitulation phase of this bear market where stocks are tossed overboard and disavowed," he wrote yesterday morning. He feels that a large number of hedge funds have been at the forefront of the selling as they raise cash to meet redemptions.

"Scanning down a list of the better known and larger hedge funds earlier this week, we were struck by how many of the biggest and best known managers are ... down for the year," he said.

Technical analysts also pay attention to other market indicators besides investors' moods, and some of those, too, are moving toward levels that suggest the U.S. market is nearing a bottom.

John Roque, managing director of Natixis Bleichroeder Inc. in New York, checked out a number of technical indicators, among which were 52-week lows. On Tuesday, he noted there were 652 lows on the New York Stock Exchange and 453 on the Nasdaq Stock Market, for a combined total of 1,105, which is the highest since 1,236 were recorded on March 17.

He noted, however, that there were similarly low figures on Jan. 18 and Jan. 22, which did not prevent the U.S. market from making a new low in March. Nevertheless, he said Wednesday figures suggest that "the market is moving closer to making a low from which a good rally can begin."

Greater than two standard deviations

A spike in the VIX up to more than two standard deviations above the 60-day moving average indicates a good level to consider getting back into stocks.

SOURCE: HAVER ANALYTICS AND CITI - U.S. EQUITY STRATEGY