Has the US stock market reached its bottom? Indices soared over the day at 8% -11%. It is extremely important for investors not to miss this moment.
We tried to find out what requirements are used by private investors and professionals managing multi-billion dollar investment portfolios to recognize the so-called “market” — the points from which its growth will begin.
The blogger investor from Plan B Economics believes that the stock market will only develop after the good news of the coronavirus pandemic arrives. “It all depends on what will happen in the USA soon.” «COVID-19, when it can be said that the epidemic is receding, people are starting to return to normal.»
Aggressive actions in China and South Korea suggest that this can be achieved in a couple of months. Timing can be both geographic and democratic. In addition, they receive a free catalyst for healthcare market growth.
Then comes the moment when the markets are saturated with negatives and stop responding to new bad news. According to the blogger, this will become an indicator of the formed «market». However, in order to make sure that the market has “recovered”, you need to wait for its volatility to decrease.
The “healthy” market does not grow or does not constantly fall by 4%, 5% or 6%, VIX is now above 80. Therefore, the market reacted to the growing panic on the actions of the Fed. It will be possible to speak about the achievements of the bottom only when market volatility decreases.
Blogger investor Ken Sri Lanka believes that it is very difficult to pinpoint the bottom of the market, but it is possible to identify the initial stage of the rising market. He suggests using the so-called “next day” signal. The Dow Jones Industrial Average, S&P 500 or NASDAQ.
The index does not matter, says Shreve. It happens that the first attempt to increase the index fails. But usually the index “bounces” after a sharp drop and ends the day near session highs.
You need to wait for a larger index growth in percentage terms and in larger volumes than on the previous day. After the first attempt, the index grows. In these few days, short positions (shorts) are closed. And if the index does not drop to a new low, then steady growth will begin.
Shreve cites the January 2019 rally as an example. As a result of a three-month decline at the end of 2018, the S & P 500 lost 20%. The index rose 3.4% on volumes larger than the previous day. It happened on January 4 — this day was the beginning of a new uptrend of the index.
Markets reached the bottom only after investors recognized themselves defeated. “Before it gets better, it will get worse,” said Scott Minenerd, senior market strategist at Guggenheim Partners. According to the expert, many investors are still hoping for a recovery in many sectors of the market. He believes that investors should have bought stocks or bonds at current levels.
Minerd is convinced that the outbreak of coronavirus has been compounded by the huge debt of companies. The US government and the Federal Reserve have to shell out huge sums of money to support the economy, the stock market and curb the coronavirus. “Even if Congress requires appropriate legislation, the market will be vulnerable for another six months,” Minerd said.
Appaloosa Billions hedge fund manager David Tepper believes it is already possible to buy stocks that have plummeted due to the outbreak of the coronavirus. He stated this in an interview with CNBC.
The thermal index does not exclude that stock indices will be calculated at 20%. “Maybe it’s time to buy a little, but just a little,” he emphasized. «The market could fall another 10% or 15%, and investors should be prepared for such losses.»
Investment advice should be very selective when choosing stocks before buying. Health sector stocks. He also plans to buy corporate debt.
“Everything looks really interesting,” concluded Tepper.
During the crisis of 2007-2009. David Tepper relied on financial companies, relying on Fed support to buy shares in bankrupt banks. He was invested in commercial real estate bonds. And did not lose. Now his fortune, according to Forbs, has reached 12 billion. He closes the top five richest among you.