Investors find themselves at a familiar crossroad now, though the sky is darkening so it’s harder to see the path forward.

From a technical point of view, U.S. stocks are clearly near the bottom of their recent range. The 850 to 875 level of the S&P 500 has worked well in the past month as a springboard toward the 1,000 level.  Traders want to buy stocks here under the 900 level.

From a valuation point of view, many veteran investors think that the economy is about as bad as it’s going to get, and therefore companies’ price/earnings and price/book multiples are also as low as they’re going to get. Value investors want to buy stocks.

From a public policy point of view, many veteran investors say they have never seen so much monetary stimulus and fiscal stimulus aimed at the stock market.They believe that the hundreds of billions of dollars pumped into the global financial system in the past couple of months, and scheduled to be pumped in the coming months, will find its way into the economy, earnings and then into stocks. They say it always has and always will. Policy hawks want to buy stocks.

From a seasonal point of view, this is historically one of the best weeks of the best months for stocks. The week before Thanksgiving has a great record of success, and the November-April half of the year has a great record of success. Seasonally focused investors want to buy stocks.

From a Wall Street point of view, 2008 has been the second worst on record for stocks—and it has had a terrible effect on prospective bonuses. Hedge fund managers, and many other industry executives, are paid a percentage of profits and asset growth. They are facing a year in which they won’t get paid anything near what they require to maintain their lavish lifestyles. If you are accustomed to making $50 million a year (percentage of assets + percentage of profits) and you only make $5 million (percentage of shrinking assets), it can really crimp your style. Hedge fund managers, most of whom are clearly net long, want to buy stocks.

From a political point of view, congressmen, senators and the Administration want to do everything they can to put money in constituents’ hands and rebuild their retirement accounts. They are as accommodative as they can possibly get, with virtually no worries about budget deficits even among old school, arch-conservative Republicans. Politicians and bureaucrats want stocks to rise.

That’s a whole lot of interest in getting the market higher. The kindling is in the fireplace, the dry wood is stacked by the mantle, and the match is lit. So what’s the problem?

The problem is that an epic deleveraging process rages on, and just won’t cooperate with mortal timetables.

Deleveraging has never been seen on the current scale before, and is not being accurately measured by economists’ conventional tools. The decline of corporate borrowing power is crushing companies’ margins and forcing them to fire employees at a rate not seen since the early 1980s just to stay within inches of meeting earnings targets. And the decline of personal borrowing power is crushing individuals’ buying power as well, forcing them to curb spending at rates rarely seen.

Although each of those vectors are bad enough, they are curling back on each other in a negative feedback loop, as consumers frightened about job losses are cutting spending to build up their balance sheets, and those cuts are in turn impairing companies’ earnings. It’s a very vicious cycle.

Normally this sort of thing only goes on in on one country or world region at a time, but globalization has intertwined economies in such a fashion it is happening in all major world regions at once. The United States can’t look to the Europeans for heightened demand for jets or software, and neither can we look to Asia. We are all in this mess together, a global synchronized recession.

How will these conflicts be resolved? Well, call me old fashioned, but I still believe that stocks represent a) a slice of companies’ future earnings stream; and b) the confidence that investors have in their estimates of that stream. If income and confidence are both falling, it’s inescapable that we’ll see lower earnings per share and lower price multiples for some time to come.

Yet I also believe that the market in the short term can do whatever the heck it pleases, very often taking the path of least resistance until it’s met with a brick wall.

So in the next few weeks, I still do think that the buying forces have a shot at getting their wish. We are incredibly overdue for a mean-reverting retracement back to the 12-month or 200-day average. It’s possible that we already saw this bounce when the market twice lifted 150 S&P 500 points from the 850 level to 1,000.

Yet a decline of the magnitude experienced recently would appear, by everything we know about sentiment and money flows, to demand a bigger bounce—one that retraces 38%, 50% or 62% of the move from the October 2007 top to the November 13 bottom. I’ve marked those Fibonacci levels on the chart above, and, as you can see, the 62% bounce hits right around the 12-month or 200-day average.

That’s the good news, if it works out. I’ll give it 50/50 odds. But in the long term, by which I mean the march of history and at least the next six to 12 months, it seems equally clear that the economy is deteriorating much faster than the consensus believes, and that it will slump a lot farther too. That’s why my target for the next bottom for stocks is around the 750 to 775 level of the S&P 500.

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This article was written by Jon Markman, contributor to InvestorPlace Media. For more actionable insights like this, visit www.InvestorPlace.com.