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Bear Market Bottoms ExaminedSo many bulls and bears are stating their cases on social media as to whether or not a bottom is in so I thought I'd take some time today to examine what a daily bottoming process looks like using SPX. Standard & Poor's 500 was created in 1957 and since then it has gone through 9 bear markets (Defined as a GREATER THAN 20% decline on a CLOSING basis). 2022 will make 10 but at this point we do not know whether or not we have a bottom in place until we can break above the all time high of 4818.62 As you can see from the below charts, with the exception of Oct 1987; all the bottoms have large & steady "thrusts" IMMEDIATELY after the lows were made that held the following re-tracements IMMEDIATELY: .382 - 67% (6 out 9 bottoms- 2009, 2002, 1982, 1974,1966, 1962) .50 - 11% (1 out 9 bottoms-2020) .618 - 11% (1 out 9 bottoms- 1970) < .618 - 11% (1 out 9 bottoms-1987) Our current bottom could NOT hold the .618 immediately after the low was made therefore it falls into the category of the 1987 exception/rare case. The strongest bull cases show a thrust and then hold of a .382 re-tracement. I'm using a very basic bar chart with black bars to cut down the noise of everything, inserting a Fib Re-tracement, drawing the immediate thrust and adding the number of trading days it took to get above the last lower high. June 1962 (Approx decline: 27%) Oct 1966 (Approx decline: 22%) May 1970 (Approx decline: 33%) Oct 1974 (Approx decline: 48%) Aug 1982 (Approx decline: 27%) Oct 1987 (Approx decline: 33%) Oct 2002 (Approx decline: 47%) March 2009 (Approx decline: 56%) March 2020 (Approx decline: 32%) After looking over all these bottoms I must say the bears do present a strong case that the bottom is not yet in place. IMO, the only similar chart from a bulls perspective is the May 1970 case as it does resemble the "look" of our current bottom however look at how long it took to get above the last lower high. I hope you enjoyed this post...at a minimum it gives me one post that goes back in time to look at the daily charts of all 9 SPX bear market bottoms to analyze the look and feel of a bear market bottom since they happen so infrequently!
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