Yesterday was another sour day on Wall Street, as investors ignored the Fed's $85 billion bailout of AIG and worried who might be the next shoe to drop. I certainly have to agree that the last few minutes of trading were ugly, with the stock market closing just about flat on its bottom. But -- yes, there's an encouraging but!

As bad as yesterday's session was, it brought us much closer to a resolution of the market's problems. Finally, we're starting to get the kind of technical readings that could help put in a solid bottom, possibly by the end of this month or sometime during the first half of October.

On the sentiment front, the CBOE Volatility Index, which I discussed in a Special Alert I sent to my Profitable Investing subscribers on Monday, skyrocketed to 36, its highest close since March 2003, when the first bull market of the new millennium lifted off. That's a sign of pervasive, palpable fear. From a contrarian point of view, fear is necessary ingredient in all major market bottoms.

Likewise, some of my gauges of 10-day market breadth and volume are pointing to the likelihood of an initial, tentative bottom soon. Mr. Market will no doubt "test" this bottom a couple of times in the weeks ahead, but at least the process is now unfolding as history tells us it should.

What to do now? Ramp up your buying.

I can't sign off without a comment on American International Group (NYSE: AIG). The federal "line of credit" is better than bankruptcy -- it preserves at least a tiny bit of value for shareholders. However, the central fact of the deal is that the federal government now owns 80% (79.9% to be exact) of the company.

Thanks to Uncle Sam's lifeline, AIG will almost certainly survive in some form. Even if the business recovers completely, though, the dilution will hold back any appreciation in the shares. I estimate that, at best, AIG stock will trade in the $10-$14 range five years from now.

For most investors holding the stock in a taxable account, it makes more sense to sell now and capture the loss.