To The Moon

When the Market will hit Bottom? 2 Ways to Comfirm & 3 Levels to Watch

U.S. stocks and other stock markets fell last week after raising interest rates.

The S&P 500 officially fell into its 20th bear market in nearly 140 years. As of June 17, the S&P has fallen more than 23% since its January 2022 high.

 $NASDAQ(.IXIC)$ decreased 4.78%, $DJIA(.DJI)$ declined 4.79%, YTD performance of each are, -24.7%, -17.5% respectively.

$S&P/ASX 200(XJO.AU)$ Last week performed the worst week since the pandemic shock in March 2020.

$Straits Times Index(STI.SI)$ ,slightly drop 2.6% weekly, and YTDA IS -5.66%.

Crude oil price $Light Crude Oil - Jul 2022(CL2207)$ fell nearly 10% last week, and YTD is 25% yet. Experts expected more drop for short-term.

Gold futures $Gold - main 2206(GCmain)$ slightly drop 1.78%, YTD in 2022 is -0.66%, this sector expected to be save heaven during inflations.

1. Equity Performance During Recession/Inflation/ Bear Market.

According to Markets Insider, more Americans are googling "recession" than at any time since 2004.

Below are on chart support by  telling the Global Equities performances during 1970s inflation.

We can see the circumstances that CPI changes higher than 8%, Energy and Precious Metals performed much better.

About the Equity, According to Barclays Research，Equity Prices average declines by 27% during recessions. 

Meanwhile, The average drawdown in 13 Bear Markets since 1929 has been 40%. The current decline in equity prices (23.7%) is still small for a typical Bear Market.

2. How long will the bear hold？How to comfirm a bottom comes?

Mott Capital Management analyst Michael Kramer shared on investing.com, there are two ways to observe:

1) Under normal circumstances, when the market is close to the bottom, the difference between the number of new highs and the number of new lows on the New York Stock Exchange and Nasdaq will bottom first, but it has not and is still falling.Ideally, the number of stocks making new highs begins to match or exceed the number of new lows, and the market may have bottomed out.

2) When more stocks price are higher above their 200-DMA, then signs of a market bottom appear.

Quantitatively, sometimes, in a fully bear market, only 10% of S&P 500 stocks that trade above their 200-DMA, compared to about 14% today, the current bear market may not be complete enough.

The percentage still has room to decline, so far. 

3. When will bottom appears? around what point?

Bank of America chief investment strategist Michael Hartnett pointed out in one report recently:

"The average decline of the S&P 500 index from top to bottom is 37.3%, and the average bear market lasts 289 days. History cannot accurately guide the future, but with reference to the above data, the low point of the S&P 500 this round is about 3000 points, and this round of bear market will be in Ends October 19, 2022 (35th Anniversary of Black Monday)."

Hartnett said that based on history, the current round of U.S. stock bear market may end in October. By then, the S&P 500 could fall to around 3,000, still about 18% downside from current levels.

It sounds like there are still downside risks for U.S. stocks technically, and investors looking to buy on dips should pay attention to three important points in the S&P 500.

Hartnett mentioned: "The S&P 500 is a 'nibble' at 3,600, a 'bite' at 3,300, and a 'gorge' at 3,000."

Do you have the same expectations?