After six punishing months for the stock market, investors want to know whether the bottom has been reached. People are understandably eager to be done with this downturn and see markets move forward.

After six punishing months for the stock market, investors want to know whether the bottom has been reached. People are understandably eager to be done with this downturn and see markets move forward.

It's a tough wish at a time when the U.S. economy is clearly contracting and likely in recession. The good news is that stocks typically recover several months ahead of the economy. The bad news is that we're probably closer to the beginning of this slump than the end.

"People are just stunned by what's going on in the economy, by their finances, by the stress," said Bernard Baumohl, managing director of The Economic Outlook Group, a forecasting firm. "We're in the belly of the recession beast, and we're going to have to get used to it."

Easier said than done. Debate rages about what stage our economic crisis is in. Some are optimistic that the government's moves to flood the economy with liquidity means a shallow recession or none at all; others believe Washington alone can't repave deep potholes on Wall Street and Main Street, and are braced for a long, bumpy road ahead.

Remember that the stock market will show signs of bottoming well before every bit of bad economic news is wrung from the headlines.

These milestones won't be obvious or appear at once, and keep in mind that just because stocks stop going down doesn't mean prices will roar to new records. The damage to the economy is done, and will take time to repair.

Knowing what to watch for can help you invest with greater confidence. Here are three key leading indicators to put on your radar, along with five caveats to keep them in focus:

More investment professionals are bearish nowadays on U.S. stocks than bullish. One closely watched sentiment indicator comes from Investors Intelligence, an investment service that measures the mood of more than 100 investment newsletter writers each week.

Investors Intelligence editors Michael Burke and John Gray spied trouble for stocks last fall when more than 60 percent of newsletters were bullish. The poll as of April 15 showed 37.8 percent of newsletters were upbeat, above the 30.9 percent reading in mid-March. Meanwhile, 38.9 percent of newsletters were bearish and 23.3 percent belonged to the correction camp, expecting further market declines but hopeful that lower prices will spell buying opportunities. The persistent pessimism says to Burke that the market is bottoming.

"We could be moving pretty much to the upside starting in July or so," he predicted.

Caveat emptor: The investing climate is unsettled, and the broad capitulation that generally heralds the end of a market downturn hasn't happened, said Kathy Bostjancic, a senior economist at Merrill Lynch & Co.

Indeed, many portfolio managers are shifting more into stocks.

"A lot of people on the equity side are very eager to see the bottom and anxious about missing it," Bostjancic said. "But it looks to us like the job losses and consumer recession is just in the very early stages."

The time to be bullish, she added, is when buyers are "anxious that there is no sight to the bottom. But we're not there yet."

Sentiment also influences the chart readings that guide Mark Arbeter, chief technical strategist at Standard & Poor's Inc.

"You can try to call a bottom when there's a lot of pessimism," Arbeter said, "but the market doesn't normally start to right itself until sentiment moves away from bearish extremes — and that's what we're starting to see."

One gauge that Arbeter favors is the number of stocks hitting new 52-week highs or lows on the New York Stock Exchange and Nasdaq.

"Many times you'll see a shrinkage in the number of new lows as the market is bottoming out," Arbeter said.

Stock prices will recover steadily and substantially, Arbeter said, with good prospects continuing for the materials and energy sectors, and relative strength in home-builder shares.

Caveat emptor: The credit crisis may have peaked, but the consumer crisis is just beginning, and historically stocks do not post extended rallies when consumer sentiment is so weak.

Record household debt, declining prices for stocks and real estate, a bleaker jobs picture, plus rising fuel and energy costs and other inflationary pressures, are fraying consumers' purse strings.

It's not that people aren't spending, but given mounting money worries, they're buying mostly what they need and less of what they want. That's expected in tough economic times: food, drinks, medicine and other basics top the shopping list. Meanwhile, new cars, designer clothes, jewelry, restaurants, vacations and other "nice to have" goods are penciled on the bottom lines, if at all.

These companies tend to be canaries in the data mines. "Consumer discretionary typically is the first to fall heading into recession," Swanson said, but it also rebounds earlier than other market sectors.

Caveat emptor: Market gyrations have slowed dramatically since the Bear Stearns bailout in March. Yet another shoe could drop as recession's noose tightens — namely debt-crunched consumers grappling with credit-card bills and higher expenses.