Finding Bottoms in Bear Markets
Stock Market Update - Technical Analysis from Previous Bottoms and Similarities with the Current Market
The recent violent market action is characteristic of a bear market. Despite this, the rapid recovery from Monday's selloff was impressive, even considering today's bearish candle that hints at an imminent gap fill. Crucially, two events suggest that any subsequent dip or selloff would present a buying opportunity.
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This article anticipated how overheated was the market, and set the $4800 target for SPX since December 2024, in the middle of the euphoria:
Navigating the Market's Tides: The Power of Elliott Wave Analysis
When the market was declining, this publication anticipated the importance of a crucial moving average to monitor any potential bounce, if the bounce didn’t happen, a bear market (further selloff) was likely, and that was the case:
Navigating Market Crossroads: A Technical Study of Historical Corrections
Tracking the selloff, this publication anticipated the bounce from $5,528 to $5,765 before further decline - the actual top was $5,786 and the index resumed the selloff:
In anticipation to the death cross between the 50 and the 20 daily moving averages, this publication provided a long term view of that event before it happened:
When many people mentioned that other stock markets were better than the US market, this publication anticipated that a selloff was due for Europe, China, Japan, and other regions. Those other markets crashed just days later:
Bearish Crossover and Divergence Analysis: Market-Wide Implications
After reaching bear market levels, these publications started the study of bounces in bear markets and a significant rare event that has preceded significant bounces (two studies):
Today, we will study the likelihood of a bottom being in studying historical bottoms from 2002, 2009, 2018, 2020, 2022; and the current context in the stock market update.
We will use breadth indicators that can be found in the educational library:
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SPX:
On Monday I posted an article highlighting the bearish context, and it also mentioned:
The latest candle also left a gap open, which can sometimes act as a magnet for price. While we might see a green morning move, the overall bearish pressure implied by the widening bands remains a concern. For a more convincing bullish scenario, we would need to see a stronger bullish candlestick pattern emerge, such as a hammer (a bullish reversal candle) or a solid green belt hold (a strong, long green candle that opens near its low and closes near its high, indicating strong buying from the start).
The green belt hold candle happened, and in addition I posted in the chat that 96% of the stocks listed in the SPX went up on Tuesday.
I will be very specific in my analysis today, because a bear market generates confusion, as I wrote in previous publications “Price moves can be very rapid”.