Have We Hit Bottom?

The question of the moment is: Have we seen a bottom in the Stock Market?

While no one knows for sure, there is a good deal of evidence that the bottom is now behinds us. Three weeks ago, the market was deeply oversold, with many indicators rivaling the lows seen in the Great Recession of 2008; though this time we did the damage in six weeks instead of over 18 months. We have bounced off of that March low with considerable breadth and momentum. In fact, last week the stock market was up +10.5% for the best week in almost fifty years. Typically when you are deeply oversold and you get a strong, sustained bounce, it locks a bottom in place.

That is not to say we are out of the woods. We are entering earnings season and the word “bankruptcy” has been battered about around the worst hit companies. Mirroring the continued bad news with the virus, there is likely more bad economic news ahead. In addition, nearly 70% of markets that sell off sharply, so called “waterfall declines,” go back down to retest the lows.