{"id":12558,"date":"2019-01-10T12:11:39","date_gmt":"2019-01-10T17:11:39","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=12558"},"modified":"2019-01-10T12:11:39","modified_gmt":"2019-01-10T17:11:39","slug":"historically-what-is-the-character-of-a-market-bottom","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=12558","title":{"rendered":"Historically, What Is the Character of a Market Bottom"},"content":{"rendered":"

The market plunged into its December low. The S&P fell 450 points in 3 weeks, and the number of stocks trading above their 20, 50, and 200-day moving averages hit levels not seen since the Financial Crisis. <\/span>
\n Now the market is moving straight up – call it a V bottom. The S&P has recaptured almost 250 of those lost points.<\/span>
\n This has Wall Street wondering: Is that it? Is a bottom in place? Does the market need to go back down and test the low, or can it just keep moving higher from here? <\/span>
\n Let’s go back in time and look at previous bottoms and see if there is a trend, see if a certain bottom formation is more prevalent than others. <\/span>
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\n1932:<\/strong> Mini double bottom, with lows only 2 months apart. Initial rally recaptured the stiff move down that preceded the bottom.<\/span>
\n\"\"
\n 1935:<\/strong> Mini double bottom in 1934 failed. Bigger double bottom between 1934 and 35 formed, with the second low being a V bottom that very was quickly followed by a huge vertical move. <\/span>
\n\"\"
\n 1938:<\/strong> V bottom, but the S&P stalled for a couple months before legging up again. The V took place right after the index broke down to a new low. <\/span>
\n\"\"
\n 1942:<\/strong> V bottom with what appears to be a head-n-shoulder bottom. The rally off the low was steady, only pausing near the previous high before breaking out again. <\/span>
\n\"\"
\n 1947:<\/strong> Large double bottom with lows almost a year apart. When the second low was in, the market gapped up and went virtually straight up.<\/span>
\n\"\"
\n 1949:<\/strong> V bottom and then lock-out rally. Despite things looking pretty bleak, given the break of the previous and vertical plunge, the S&P recovered quickly. <\/span>
\n\"\"
\n 1953:<\/strong> Lower low followed by V bottom and lock-out rally. <\/span>
\n\"\"
\n 1957:<\/strong> Double bottom separated by a couple months. The index then grinded higher for several months and then seemed to hit an inflection point in mid-1958.<\/span>
\n\"\"
\n 1960:<\/strong> False breakdown and then lock-out vertical move.<\/span>
\n\"\"
\n 1962:<\/strong> Double bottom separated by about 6 months. Then steady move up. <\/span>
\n\"\"
\n 1966:<\/strong> Steady downtrend…mini double bottom…steady uptrend. Once the second bottom was in place, there was no threat the low would be tested. <\/span>
\n\"\"
\n< B>1970: Mini double bottom, followed by breakout at resistance. Then continuation of the move up with no threat to retest the lows. <\/span>
\n\"\"
\n 1974:<\/strong> Double bottom followed by steady rally. No threat to test the low once the move started. <\/span>
\n\"\"
\n 1978:<\/strong> Lower low followed by mini head-n-should bottom. A robust move took out the previous high, and after a rest, the uptrend continued. <\/span>
\n\"\"
\n 1982:<\/strong> Failed breakdown was followed by V bottom and robust rally that paused briefly at previous high before continuing up. <\/span>
\n\"\"
\n 1987:<\/strong> Double bottom followed by slow grind up. <\/span>
\n\"\"
\n 1990:<\/strong> Head-n-shoulders bottom followed by robust rally once the neckline was taken out. The previous high was easily eclipsed. <\/span>
\n\"\"
\n 1998:<\/strong> Mini double bottom followed by steady rally that paused briefly in the area of the previous high before continuing on. <\/span>
\n\"\"
\n 2002:<\/strong> Triple bottom spread out over 8 months. Then S&P moved up 11 of 12 months with only minor pauses. <\/span>
\n\"\"
\n 2009:<\/strong> V bottom following a lower low. Once the low was in, the S&P rallied 12 of 14 months. <\/span>
\n\"\"
\n 2016:<\/strong> Double double bottom. The market paused at the previous highs, but otherwise moved steadily up for 2 years. <\/span>
\n\"\"
\n 2019:<\/strong> ??? So far we have a V bottom. Or this might not be the bottom. <\/span>
\n\"\"
\n Conclusions :<\/strong><\/span>
\n Bottoms come in all shapes and sizes and play out over many time frames. There is no dominant pattern. There are V bottoms. There are mini double bottoms where the lows are separated by a month or two. There are big double bottoms that take 6-12 months to form. We cannot look for a certain type of pattern or sequence to play out. Bottoms really do take many shapes, so if you’re looking for something specific, there’s a good chance you won’t get it. <\/span>
\n But…<\/span>
\n One characteristic that exists in almost off these bottoms is a very robust and energetic subsequent rally. In fact most of them are lock-out rallies that don’t let investors in at lower prices once they begin. <\/span>
\n There are many examples of the market falling to lower lows – and you knew news and sentiment were terrible during those times – only to quickly reverse and head straight north.<\/span>
\n So if you think the market has to go down and test those lows, it doesn’t. If you think the market has to pause or a give a little back and form a larger foundation, it doesn’t. <\/span>
\n The most dominant common characteristic between these charts is that once a bottom is in, the market surges up.<\/span>
\n I’m not calling for a low. What we got in December may just be a moderate drop within a bigger downtrend, with much lower prices to come. But I am making the point that when a bottom is in place – no matter how terrible things are – the market tends to just take off. Even if you are rightfully bearish, not being open-minded to the possibilities will lead you to missing the beginning stages of some big rallies. <\/span>
\n Jason Leavitt<\/span>
\n charts courtesy of Oppenheimer<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The market plunged into its December low. The S&P fell 450 points in 3 weeks, and the number of stocks trading above their 20, 50, and 200-day moving averages hit levels not seen since the Financial Crisis. Now the market is moving straight up – call it a V bottom. The S&P has recaptured almost […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/12558"}],"collection":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12558"}],"version-history":[{"count":0,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/12558\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}