The stock market has reached a curious inflection point. Will the Dow fall to 5,000, as some economists imagine it might? Or are stocks flirting with a bottom right this very moment as you read this, as others prognosticate?

No matter what the answer is, stocks are looking cheap. Sure, the market could fall another 25 percent from current levels, but that doesn't necessarily mean it isn't cheap today.

Citigroup estimates that expected earnings from companies in the S&P 500 index this year give them a collective price-to-earnings ratio of 13 at today's market levels, according to Barron's cover story this week. That's the level where most (but not all) bear markets have historically bottomed. The story also points out that stocks look valuable compared with the size of the GDP and with the price of gold.

And the pervasive negative sentiment may actually be a good sign, as Henry Blodget points out. "The more negative everyone gets, the more likely we're getting close to a bottom," he writes.

And then there's the hopeful news that Merck offered $41 billion to acquire Schering-Plough, and, even though the offer represents a 34 percent premium to Friday's close, many analysts are saying that price is still too low. What's even more promising is that Merck managed to do the deal with a combination of cash, stock, and $8.5 billion in debt.

Will the laughter be contagious? When Warren Buffett heard the news as it broke this morning on CNBC, he said this: "Well, every deal does tend to brew another deal."

The pharmaceutical market, of course, has been more deal-happy during this recession than any other sector. Pfizer recently reached a deal to buy Wyeth for $68 billion, and Roche is in the process of trying to buy the minority piece of Genentech it doesn't already own. In another positive sign, Roche just raised its bid as the takeover becomes hostile.

Outside of the pharma industry, plenty of big companies are sitting on piles of cash while they ride out this market downturn, and a true sign of the stock market bottom will come when they start to be unleashed.

In the technology sector, companies like Oracle, Google, and Microsoft are plenty well capitalized for cash deals. Last month, Cisco took the contrarian route and raised $4 billion in new debt, which invited speculation that it's prepping for a big deal when the time is right.

Of course, Google's Eric Schmidt said just last week that he believes it's still too early to dip into the deals market as the market might still have a long way to go.