How Best to tell if Market has really Bottomed?

18 August 2022

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This is presently the most pressing question that many would want an answer to.  Some chartists speculated that the present US market trend is just like in 2008 when the market is expected to undergo another downtrend or drop before it can recover.  

Some went as far back to draw charts and superimpose the charts of 1937,  2000, 2008, and 2022 to prove their points.  This article will show how the market has really bottomed and if we should enter the market now.

When will Market Bottom?

The market often considered to have bottomed when there are more than 80% of the stocks hit their 200MA as predicted earlier on 26 July 2022

What if This Happens Again?

The market may cause a secondary bottom and collapse again like it had happened on September 15,  2008, when Lehman Brothers went bankrupt.  On that very day,  the Dow Jones Industrial Average had lost 4.5%,  the largest since the  911 Terrorist attack on the Twin Towers in New York on September 11, 2001. 

How to Tell if such a thing will happen again?

To know how to tell, please click the "Reveal" button to see the next chart. 

This chart shows that there were 2 events that caused the market failures and did not recover after the market stock hit the 200MA baseline. These 2 events are: 

  

a)  Lehman Brother Event (Marked Event 1 in the Chart)

Before the Lehman Brothers event,  the market was running on another track in 2007 as shown.  The stocks hit the 200MA around March 2008 & recovered.  When Lehman Brothers declared bankruptcy on September 15, 2008,  the market hit the 200MA again.  This time,  it went really down under, changing also its course to run on a new track as shown.

b)  The Covid 19 (Marked Event 2  in the chart)

This event started by Fed's QT in 2018/19.  The market recovered after stocks hit the 200MA in 2019 but it was soon spooked by the Covid19 break out in China.   The secondary bottom appeared only after the US Government started up the 3 Trillion USD Covid Stimulus packages in March 2020.

In Conclusion

If there is a similar happening like Lehman Brothers appears this time,  it is likely to do exactly the same.  It will run down and break the red trend line as shown before recovering.  It might also run on an entirely different track like 2008/09 if the secondary bottom were to be as bad as the Lehman Brothers event.

Disclaimer:  This article is for information and educational purposes.   Readers are advised to conduct their own research and study to make their own investment decisions.