There's something about a four-digit Dow that makes you sit up and take notice.

Uptrend
DJIA over five years

Because a rally has promptly ensued every other time it's been breached, Dow 10,000 has become something of a comfort level for investors -- an all clear to buy. So it matters that today the Dow dove below the mark for the first time since the spring downdraft.

"I think that 10,000 is a very important psychological level," says John Bollinger, president of

EquityTrader.com

. "Beneath it, we attract some buying. But the other side of the equation is that closing below 10,000 will scare some people and cause some selling."

Not that fear is a bad thing. With every whoosh down this fall, Wall Street has wondered if the fabled capitulative selling, the fear-driven share dumping that shakes all the weak holders out of the market, has come. And inevitably, people are thinking today, with a snapback following a big drop at the open -- which sent the Dow, the

Nasdaq Composite

and the

S&P 500

to lows not seen all year -- was the real thing.

Scary Territory
Dow back in four digits

"Here we are," says Bollinger, "painfully retesting the lows, scaring the bejabbers out of everyone. This is the perfect scenario for a shakeout."

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"We started to see some real fear this morning," agrees Todd Clark, head of listed trading at

W.R. Hambrecht

. "That's good in the perverse way that Wall Street works." Clark liked that the Nasdaq broke below its spring low of 3042 and snapped back, and that there were a lot people buying put options -- a bet the market would go lower -- in early action.

Puzzlement

Still, while the pieces are falling into place for the market to settle, they might not all be there yet.

"You need enough volume to suggest some kind of a washout," says Frank Gretz, market analyst at

Shields

. "You also need some change in market psychology." The surge in put buying at the open may have been too short-lived. While the ratio of puts to calls on the

Chicago Board Options Exchange

surged as high as 1.22 in the first half-hour of trading, it has since settled to 0.91. Shields would like to see it close the day at 1 or higher.

Meantime, while the technical analysts gazed at charts and sentiment indices and implied volatility and the like, some market participants were turning to alternative indicators. Noting that

CNBC's

Maria Bartiromo had voiced calm before the bell and then turned shrilly negative once the market opened, one hedge fund manager sent the following instant message:

forget the futures ... everybody else can hang on those ... i'm using the maria indicator - just that, i'm not looking at anything else!!! she got very negative after the open and low and behold that was the turning point in the mkt - at least for the moment.