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SAN FRANCISCO — Bear markets are often characterized by short, sharp rallies that serve mainly to lure investors back into the market so they can be dealt with harshly in the next downturn. If that sounds a lot like what’s occurred recently — an extremely sharp rally Friday followed by a lackluster session Monday and then Tuesday’s decline — it could be because this is a bear market.

I know many of you agree (grudgingly or not). But for those unwilling to contemplate the bear moniker, I ask the following: How else to describe a situation where the Nasdaq Composite Index is down 36% from its peak while the Dow Jones Industrial Average and S&P 500 are down 13.9% and 11.6% from their respective records? A decelerating or hibernating bull market? A sharp correction. Or maybe this is one of those speed bumps (7.5-months high) or a stair-step down (a really steep one) that Wall Street gurus talk about.

Tuesday’s action, I’m sure, will bring out more bottom pickers who’ll note the Dow rebounded after hitting 10,026.45, or just a hair above the intraday low hit Oct. 12, at 10,023.49. Still, the index ended down 1.5%. Similarly, the Comp finished about 40 points above its intraday low around 3174, but still down 2.3%. This is good news?

All that occurred before the postclose disappointments, most notably from IBM (IBM — Get Report ). Copper Mountain (CMTN ). RealNetworks (RNWK ) and RF Micro Devices (RFMD ). Intel’s (INTC — Get Report ) news was pretty anticlimactic.

IBM may not be the bellwether it once was, but its lackluster third-quarter results are going to have a negative impact Wednesday, at least at the open — if only because traders were chatting intraday Tuesday about how IBM was going to blow out expectations. As I mentioned in the RealMoney.com Columnist Conversation, $1.12 a share was the figure bandied about.

In Globex trading, S&P 500 futures were lately around 1354.40 vs. fair value at 1361.82, extending a decline that took them down 31.70 to 1359.80 in the regular-hours session.

IBM’s news might cause a retest of both Dow 10,000 and the S&P 500’s Sept. 12 low of 1328, agreed Peter Green, market analyst at Gerard Klauer Mattison and Harry Schiller, editor of the Short-Term Consensus Hotline.

But both Green and Schiller expressed hope those lows will hold, with Green even suggesting tomorrow could result in some kind of climactic reading that signals a bottom is finally at hand, at long last (already). Green also suggested Federal Reserve Chairman Alan Greenspan might send signals he’s concerned about the weakening market’s potential to hurt consumer confidence when he speaks at the CATO Institute Thursday.

Some might find this every-cloud-has-a-silver-lining-type outlook laudable. One problem is that the market is arguably doing precisely what Greenspan wants. Second, that kind of optimism is certainly not rare, further evinced in traders’ expectations for IBM and the continued bullishness of most Wall Street gurus. Third, no matter how many times they’re disappointed, no matter how bad things get, people keep wanting to believe the next bit of news is going to be good. Or if it’s bad, it will be so bad that it will prompt massive capitulation, signaling the bottom.

Perhaps the question should be: What is there to be bullish about? Which is exactly what Gregg Schreiber, vice president of institutional futures sales at Bear Stearns. wondered Tuesday afternoon.

For the record, Schreiber has been and remains bearish on the outlook for stocks. He ticked off a litany of reasons not to be bullish, including: crude prices, well down from last week’s highs but still nearly $33 a barrel; the euro, which traded near 85 cents before rebounding to close around 85.40 cents Tuesday — below intervention levels at any rate; earnings warnings and shortfalls; and a belief valuations for some stocks are still out of whack, Schreiber says.

Additionally, I still see problems because I don’t think you’ve started to see the economy slowing as much as the stock market is hinting that it will, he said. The stock market’s lackluster track record at predicting recessions notwithstanding, Schreiber’s point was that as the wounded stock market begins to affect the economy, the slowing economy will weigh further on the stock market, preventing a recovery. (Yes, Barron’s Alan Abelson offered a similar view this weekend, although Schreiber claimed — sacre bleu! — to have not seen the article.)

It’s a bear market

and

I don’t see any bottom in sight, the trader said, believing the overall market direction will be down until the first quarter of 2001, at least.

Predictably, Schreiber was dubious when I ticked off the reasons most market watchers remain bullish — rising money market assets, growing pessimism, and a belief the problems in the Middle East will be resolved sooner rather than later.

Some argue rising money market assets — at $1.8 trillion as of Oct. 16, according to Credit Suisse First Boston — provide a cash cushion against further declines. But money market assets aren’t going up because people are bullish and they’re waiting to jump back in, Schreiber declared. They’re up because people are fleeing the market.

The trader agreed the worst troubles in the Middle East are likely — hopefully — behind us. But peace in the region won’t stop oil prices from rising if there’s a cold winter, he cautioned.

As for the sentiment issue, Schreiber’s comment on money market funds seems to support the notion that people are frightened. Put buying is also on the rise. But judging from the attitudes of most people on Wall Street, there’s not enough pessimism to say any kind of sustainable bottom has been established.

Bob Brinker, publisher of Bob Brinker’s Marketimer and host of ABC Radio’s MoneyTalk. advised his newsletter subscribers last night to go long the Nasdaq 100 Trusts (QQQ — Get Report ). Brinker expects the QQQs, which fell 4.6% Tuesday, to rally 20% over the next two to four months.

That’s according to various subscribers to his service (I do not), one of whom told me Brinker recommended investors commit 30% to 50% of existing cash reserves to the trade.

I was unable to reach Brinker to verify the recommendation and/or ascertain why he’s apparently relenting from the bearish stance adopted in January.