I just fixed a similar problem on my 97 S320, and yes it turned out to be the lower ball joint. They do go bad. I had the same squeaking you described and searched for over a month for the culprit. finally the tire jockey at Sears found the problem while balancing and rotating my wheels. Sears did the repair right there for around $300 (they got a new ball joint delivered locally the same day) which blew me away as I never thought they could do much more than sell tires and batteries.

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KCScout
98 S420 My Wife's Baby
97 S320 My road car
83 300D My old road car (love that diesel)
81 300SD Wife's former Baby
81 240D A fun stick shifter
71 220D My first one