NEW YORK (FORTUNE) - Everyone on Wall Street is asking the same question, from hedge fund managers who piled into once-hard-charging plays like mining stocks, commodities and crude oil to technical analysts who study each wobble in the indexes to predict the market's next move. Have we reached the bottom?

Although the drop, which began last month, has only taken the S&P 500 down about 5 percent, the fact that the overall market hasn't experienced a 10 percent correction in more than three years has left many investors more shaken up than usual.

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Adding to the general anxiety level is the more painful plunge overseas - Japanese shares have fallen 12.7 percent while European indexes such as Germany's Dax and France's CAC are off 9.7 and 7.3 percent respectively. Emerging markets like Russia and Turkey have been hit harder. So there really hasn't been a safe haven anywhere - even gold has lost its luster.

So far this week, the Dow has lost more than 300 points. Technical strategist Mark Newton at Morgan Stanley says he's watching several key support levels on the S&P 500 and the Dow to gauge how vulnerable the market is to a further downdraft.

Like other technical experts, Newton uses tools like past highs and lows, advance-decline ratios and support levels to predict the direction of the market. Going into Thursday's trading day, he saw a key level for the S&P 500 of 1245 (the May low for the S&P), which the market dipped below less than three hours into the trading day.

The next stop down, he says, is 1230. "If we get below there, that will cause a real deterioration in the technical structure," he says.

In terms of the Dow, he sees key short-term support levels at 10,735 and 10,684. "It really needs to hold where it is now and stay above 10,500 - that's the trend line support from the lows in October of 2004."

Newton says the timing of this move shouldn't surprise market veterans. "Since 1960, 90 percent of market troughs have occurred 16 to 24 months after a presidential election," he says. What's more, we're in the fourth year of the cycle in terms of market bottoms, he says, noting the troughs in October of 2002, 1998, 1994 and 1990.

So while the current correction is certainly painful, it's hardly out of the ordinary in terms of market history.

"It's a correction, not a bear market," adds veteran market strategist Byron Wien of Pequot Capital. "I don't think we're quite at a bottom but we're getting close."

One key sign that the market has bottomed is what insiders call capitulation-panic selling, and a belief that the market isn't about to simply shoot higher. For my part, I'm not sure we're there yet.

Two weeks ago, I wrote that commodity plays like Phelps Dodge were still scarily high, and I got angry e-mail from still-hopeful investors. PD (Research) was in the mid-80s when I wrote that story - it closed at $79.99 Thursday.

There's still too much easy optimism in the market - a sell signal if there ever was one - but we are getting closer to the inevitable bottom as the mad money gets worn down.

Before any rally begins, though, I think we're probably going to have to face another hike in interest rates when the Federal Reserve meets later this month. Getting that out of the way, along with the arrival of second-quarter earnings news in July, should be a much-needed balm for sore investors this summer.