Every time we have a bear market rally, loads of people begin to wonder if we have really hit a bottom. As a technical analyst, I believe that we can look at historic events and derive an idea of what might happen in the future.
Because of this, I have done a little analysis of the 2003 bottom and then compared it to our current market condition to see if we can find any clues as to if we’ve hit the bottom and if so, what to expect.
To start off, here is what the market bottom of 2003 looked like:
I pointed out the line of support that acted as a bottom with the purple line. Now, let’s move on to a zoomed in view of the bottom with some analysis:
So, what we have here is basically a triple bottom. The reason I am saying “basically” is because the last bottom doesn’t rest right on the support line but it is definitely close enough to group with the two other bottoms. I’ve pointed out the spikes in volume at each bottom as well as the dips in MS and TSV that accompany the bottoms.
Now, below is what we are looking at currently in the market. The latest dip would best match the first of the three bottoms on the ’03 chart.
We do see the dip in TSV and MS, but the volume didn’t spike like it did back in ’03. Also, the current rally has gone up over 20% while none of the ’03 rallies ever broke the 20% mark.
Ultimately, we could be seeing a similar chart form. There are definitely some characteristics that exist in both, but it looks like if we are going to go down that same road, this version might take a lot longer and have much wider swings.