Three Signs the Market Has Bottomed

Managing Editor’s Note: The market is sending a very clear message right now…

The bottom is already in. Aside from some short-term volatility ahead, the worst of this tariff-fueled downturn is likely behind us.

That’s the message from Near Future Report senior analyst Nick Rokke in today’s Bleeding Edge. He’ll get into the three signs that the market has already bottomed and what you can expect in the weeks and months ahead…

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When the market talks, it’s critical that we listen.

And right now, it’s sending a very clear message:

The bottom is in.

Last week, we saw something important. The market didn’t explode 10% higher in a single session like it did on April 9 when the White House announced a 90-day delay in the new tariffs. Instead, it climbed steadily day after day.

That’s exactly the kind of price action we want to see in a healthy, sustainable market.

Back on the Uptrend

Here at Brownstone, we’ve maintained from the beginning that this pullback would be temporary.

It wasn’t caused by economic weakness. It wasn’t because companies slashed earnings forecasts. It was about a single issue: the uncertainty about tariffs.

Which meant once trade agreements start getting inked, as we predicted they would, the market would likely resume its uptrend. And last week brought some of the most encouraging signs yet that negotiations are moving in the right direction…

Perhaps the biggest development was news surrounding a potential bilateral trade agreement (BTA) with India. Last week, India’s Prime Minister Narendra Modi met with Vice President JD Vance. They have announced plans to “more than double bilateral trade to $500 billion.”

This just reinforces what we’ve been saying… these tariffs were never about stopping trade – they were about increasing it. Specifically, they were about tearing down unfair barriers that other countries had erected against U.S. goods.

As part of the negotiations, India has announced its intention to buy U.S. defense goods, as well as committing to buying more U.S. energy imports.

And in preparation for a deal, India removed their 6% digital ad tax (a big win for Meta and Google). It also slashed its duties on U.S. solar cells, luxury cars, and bourbon. India also hinted at expedited approval for Elon Musk’s Starlink in India.

And it won’t stop with India. Here’s what Fox Business Network senior correspondent Charles Gasparino said on X.

When multiple countries are negotiating at the same time, they aren’t just negotiating with the U.S. – they’re negotiating against each other. The concessions one country makes, others will likely have to match.

That gives us even more confidence that major trade agreements are on the horizon… and that the market correction we’ve been experiencing is nearing its end.

Ultimately, it’s not what we believe that matters. It’s what the market is saying. And right now, the market’s signals are crystal clear.

Here are three powerful signs that the bottom is likely behind us…

Sign #1: Steady, Disciplined Buying

Last week, the S&P 500 delivered an important technical signal. The index traded up more than 1.5% for three consecutive days. That might not sound like a big deal at first glance, but statistically, it’s rare.

As shown in the chart below, this has only happened 11 times in the past 75 years.

And every single time, the market was higher 12 months later. The median return? A remarkable 21.9% – more than double the market’s long-term annual average.

Now, to be fair, nothing is guaranteed. Could this be the first time in history that the market finished lower 12 months after this event? Sure. But we’ll take those odds every day.

However, it’s worth noting that short-term volatility is still in the cards.

Historically, even after this signal, there’s been about a 22% chance the market dipped over the next month. So we should expect some turbulence, especially as major headlines drop around trade negotiations.

But overall, this is an extremely bullish development.

And importantly, this wasn’t just about a handful of mega-cap names dragging the market higher. That was the case during much of 2024, when the “Magnificent 7” (Meta, Amazon, Apple, Netflix, Google, Microsoft, Nvidia, and Tesla) carried the markets higher.

This time, the rally was broad. That brings us to the next bullish signal…

Sign #2: Zweig Breadth Thrust Indicator

Last week, we also saw a powerful buy signal from one of the market’s most respected technical indicators: the Zweig Breadth Thrust.

Developed by legendary investor Dr. Martin Zweig, this indicator measures market momentum by tracking the ratio of advancing stocks on the New York Stock Exchange versus total issues.

Here’s how it works…

When the 10-day moving average of advancing stocks jumps from below 40% to above 61.5% within 10 days, it signals a sudden shift from pessimism to aggressive buying. In other words, it’s a sign that big money is rushing back into the market.

Here’s a look at what happened to the S&P 500 (SPY) after the last four Zweig Breadth Thrust triggers (marked by the red lines on the graph)…

We can see the market tends to move higher in the coming months. And the historical stats are even more impressive.

Over the last 20 times this indicator has triggered, the market finished higher 100% of the time after six and 12 months. And the median return after six months is 13.2%, and after 12 months is 24.8%

The Zweig Breadth Thrust is one of the most reliable “all clear” signals in market history. And now, it’s flashing again.

And if we dig a little deeper, we can see that institutions are confidently positioning themselves for a bigger rally.

Sign #3: Smart Money vs. Dumb Money

When it comes to gauging the future direction of the market, one of the most profitable things we can do is follow the institutional money, also known as the smart money.

And right now, the smart money is speaking loud and clear.

The team at SentimenTrader does excellent work tracking this data. Their latest update shows institutional investors have become increasingly confident as the market pulled back.

This isn’t retail investors blindly buying every bounce like some financial media pundits would have us believe. This is institutional capital positioning itself for a bigger move higher.

And that’s a critical distinction.

Institutions – pension funds, endowments, hedge funds, etc. – manage massive sums of capital. They can’t just plow into stocks all at once without moving the market against themselves. They build positions slowly and methodically, planting the seeds for bigger moves down the road.

That’s why last week’s steady, deliberate buying is such an important signal.

Meanwhile, retail investors – the so-called “dumb money” – have headed for the exits.

They sold in fear over the past month. And now, many are likely staring at higher prices for their favorite stocks, realizing they sold too early.

That’s exactly why we held firm in our model portfolios.

We didn’t get shaken out by volatility. We didn’t sell into panic. Because when you sell into fear, you usually end up buying back at higher prices later on – a classic way to destroy long-term returns.

Meanwhile, as institutions quietly buy, we know what comes next…

Retail FOMO (fear of missing out) will start kicking in.

Retail investors will chase stocks higher. That new buying pressure will add another tailwind for the rally already underway.

The Market Is Talking

When we see broad-based strength, powerful technical triggers like the Zweig Breadth Thrust, and smart money loading up – that’s about as strong a confirmation as we could hope for.

And remember, this isn’t happening in a vacuum. It’s happening as fundamentals start to improve.

As we’ve talked about, trade talks need to progress for the market to move higher. That’s what happened last week with India and the U.S coming to a framework on their negotiations.

But we also want to see companies continue making sales and profits. We are seeing that. The biggest earnings report last week was that of Google’s parent company, Alphabet (GOOG).

Google blew away expectations, beating both top-line sales and bottom-line profits. First, they showed 8% growth in revenues in the advertising business. This is great for Google as it shows it can still sell ads even as AI search competition rises.

Second, regarding the AI buildout, Google reported 28% year-over-year growth on its Google Cloud business line.

And Google recently reiterated its $75 billion capital expenditures (capex) plan for the year. Most of which is going to building out AI hyperscale data centers.

This tells us that the AI boom is alive and accelerating. And last week, we saw investors get into tech stocks. We can track this by looking at a chart of the price of the Nasdaq ETF (QQQ) / S&P 500 ETF (SPY).

When this line moves higher, it means that investors are rotating back into the tech-heavy Nasdaq. And we can see how this line spiked higher last week.

When this line moves higher, it tells us that tech stocks are leading the market higher – exactly what we expect during the early stages of a major recovery.

This is the perfect setup for the technology stocks and cryptocurrencies we hold in our paid advisory services. If the market goes up 20% in the coming months, many of our holdings will go up 50% – 100%… Maybe even more.

As I wrote back on April 8, one sector to watch was the semiconductor sector. And I singled out money flowing in NVIDIA (NVDA), Micron (MU), and Broadcom (AVGO) in particular. Last week, those companies all rose by over 10% – doubling the S&P 500 returns.

Yes, tariffs and trade worries have weighed on the sector. But as Google’s management made very clear last week, AI investment isn’t slowing down. Not because of tariffs. Not because of geopolitics. Not for anything.

The hyperscalers – Microsoft, Google, Amazon, Meta, and xAI – are going full speed ahead.

And that means demand for semiconductors will continue increasing. This is one of the best sectors to be invested in right now.

Be Prepared for Anything

Of course, we should still expect above-average volatility over the next few months. We’re not out of the woods just yet.

We’ll likely see more negative headlines around trade talks. More tweets. More media hysteria. More crazy criticism.  Some of those headlines will spook the market for a day or two. That’s normal.

But the important thing is that the floor under the market is rising.

The bottom is likely already in.

And when the smoke clears and these new trade deals get finalized, the market will rip higher.

We’re positioning our readers right now – before the headlines shift and the market reawakens. The window for maximum gains is open. And those who act today could capture some of the biggest returns we’ve seen in years.

Regards,

Nick Rokke
Senior Analyst, The Bleeding Edge