Where is the Market bottom?

Search for that elusive number

As is typical of bear markets, there is no shortage of calls for market bottom. Take any 10 experts you will get at least that many Index levels as a bottom call. Which one is correct? Eventually someone will get it right and will for ever be remembered for the call a’ la the wonderful Mark Haines, may his soul rest in peace.

Market bottom is more a what than a where. It is a confluence of multiple things, enough of which have to come together to signal a level that is sustainable to build from. When this happens is still tough to predict but we will know after the fact and it will seem logical. To call a bottom now is a futile exercise, no more reliable than something out of a fortune cookie or a tarot card. I see so many chartists saying the market will bottom at this SPX level. If that happens, it is one heck of a coincidence rather than a reasoned call. And every bear market is different. The GFC ended when Fed backstopped the financial system and said they would not let it collapse. No one in their right mind was going to take the other side of that trade and the selling quickly dissipated. The ensuing weeks and months slowly cleared up the smoke surrounding the banking system and the markets emerged out of the crisis.

So what is going to signal the bottom this time? Here are some important indicators that have to do an about-face:

• I for one have been saying that Inflation brought us down and it is there that we will get the first clue of a reversion. That could come from Fed destroying demand and/or from supply chains healing and starting the long trudge back to a semblance of normalcy.

• It will have to include the fed saying they have seen reason to pause and let market forces take their course. I dont mean QE Version X. I am talking about the Fed going on the sideline.

• We are after all a consumption driven economy and consumer confidence needs to stabilize

• Geopolitics might have been the straw that broke the camels back this time around. We need this to at-least stay under control and not worsen. A larger war or another theater will only exacerbate strained supply chain and make things worse

• China is the worlds’ factory and Zero Covid policy is the key factor holding back any progress in fixing supply-chain. They need to let China open and more critically keep it open.

I am sure there are others but I see these factors as critical. If 2-3 of these start to improve, we can finally expect smart money to start seeing risk-reward lining up to dip back in. Again the rest of us will know after the fact and we can say “that my friends is where the bottom was made” and we can even put a date on it. Until then, we are all just about clueless to varying degrees.