Editor’s Note: It’s a volatile time for markets. But if anyone knows how to thrive in times of chaos, it’s our colleague Jeff Clark. Jeff has been a professional trader for more than three decades. He’s traded—and profited—through some of the worst markets in recent history, including the 2008 crisis. Today, he shares what he’s learned, and how investors can spot the moment of capitulation in stocks.
It seems like everybody is looking for a stock market bottom.
Some folks think it happened last October when the S&P 500 dipped as low as 3500. Other experts think we might be headed for a “lost decade” for stocks, where the ultimate bottom is still years away.
My best guess is that we haven’t seen the bottom of the market yet. And when it finally does happen, most folks are going to miss it – because they’re looking for the wrong thing.
Let me explain…
We’ve seen two major stock market bottoms in the past two decades.
There was the bottom of the bear market in March of 2003, following the bursting of the dot-com bubble. And there was the bear market bottom in March of 2009, which marked the end of the Great Financial Crisis.
Both of those bottoms unfolded in a similar manner.
In both of those cases, the stock market bottomed during a final act of investor capitulation. Investors finally grew tired of the day-after-day, water torture-type of decline.
They couldn’t take it anymore. And they collectively threw in the towel – selling entire portfolios of stocks, all at the same time.
In hindsight, it’s easy to spot on the charts.
Here’s how the S&P 500 looked at the moment of capitulation (blue arrow) in March 2003…
And here’s the bottom (blue arrow) in March 2009…
Like I said, in hindsight it’s easy to spot the bottom. Those moments of capitulation seem obvious.
The bear markets ended. New bull markets began.
And investors who got in near the bottom saw enormous gains within just a few months – not to mention the big gains as the bull markets matured.
Not surprisingly, most folks are now looking for similar capitulation action to mark the bottom of the current bear market. But they’re looking for the wrong thing.
Just as stock market crashes don’t happen when everybody is looking for them, the next stock market bottom is going to look different than what most folks are expecting.
Rather than ending with a final act of capitulation – with investors selling their entire portfolios all at once – the current bear market is likely to ROLL to its final bottom.
Different stocks and different sectors will reach their bottoms at different times. And that action will create a kind of “rolling bottom” for the broad stock market.
To explain this concept in more detail, I’m putting together a special presentation which will air on Wednesday, April 5 at 8 p.m. ET.
I’ll explain how this current bear market will come to an end, and how it will look different than any bear market bottom we’ve seen before.
I’ll share my prediction of what sectors look like they are closest to a bottom, and which sectors still have a long way to fall.
And I’ll share the strategy that is most likely to generate triple-digit gains from this type of action.
To register for this free presentation with one click, go right here.
Best regards and good trading,