One of the bellwethers of the stock market for some time has been Merrill Lynch. Looking at the latest quotes, the outlook for stock market bulls ain’t pretty. And it’s not so good either for bears using short option strategies on financial institutions or stock indexes.

You may recall that the share price of Merrill (MER) plunged from the 90 to the 70 vicinity in the late July period as Merrill’s decline preceded the slide of the major stock indexes. The news has only gotten worse for Merrill since then with the crash of the last few weeks — and as much as $12 Friday — taking Merrill below 55 to its lowest level since mid-2005. Some apparent major misjudgments about risk associated with the collapse of mortgage-backed securities and hedge funds cost Merrill CEO Stanley O’Neal his job. (But I’m sure he will come out okay with his reported $160 million payout. Makes me wonder where I can get a job like that, screw up so badly and still come out with big bucks, as seems to be routine in the corporate world these days.)

And the worst news may still not be out for Merrill and other investment firms and others like it caught up in the world of collateralized debt obligations and structured investment vehicles. Press reports indicate there may have been a lot of other shenanigans going on with these transaction in an effort to keep the real situation from looking as bad as it is. Who knows how deep the problems go in other firms beyond Merrill Lynch?

You may recall the situation at Bear Stearns, which more or less launched the latest financial crisis with its revelation of failed hedge funds. When Bear Stearns formed a billion dollar alliance with CITIC Securities Co. in China a few weeks ago, even a columnist in China wondered about the logic of such a matchup. Why should a quasi-state company like CITIC use Chinese citizens’ tax money in what appears to be a bailout of a U.S. firm that made some poor business decisions? Time will tell if the deal makes sense.

Seems like some financial leaders haven’t learn much from the previous generation’s savings and loan debacle in the late 1980s.