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Finding a market bottom is not as straightforward as you might hope, it's a complicated process.  For example,  Thomas Lott —a former hedge fund portfolio manager—said that he uses multiple approaches: We analyze yield curves, technical data, prior bear markets and corporate earnings among other metrics looking for signs of a bottom. In this article, we will list some ways to identify a potential market bottom and start with  Marko Kolanovic's  playbook first. Marko Kolanovic Based on JPMorgan's Marko Kolanovic , if you believe stock market will transform into something bigger than just a bounce, then consider the following plays according to the investment bank:  Longs in small-caps (P/E ratio is below Lehman bankruptcy and peak COVID)  Longs in Biotechs (~1/3 of the companies trade below cash)  Long China (reopening and stimulus are powerful tailwinds), including Tech/Internet  Long Cyclicals vs. Short Defensives  High Beta Growth, incl...

Figure 1.  2021 - 2022: Bonds ($AGG)  → Stock ( $SPY) → Commodities ($DBC)  Market Topping Market topping is a process which normally includes  different asset classes peaking in a specific sequence .  Using tech bubble as an example: Bond market peaked  in 1999 Stock market peaked  in early 2000 Stock market historically peaks an average of seven months before every recession Commodity market peaked  in fall 2000 A  bear market is normally triggered by the following series of events : Inflation rises Interest rate rises Oil price rises Fed hikes rate Note that official recession calls are the responsibility of the  NBER Business Cycle Dating Committee .  Since WWII, every recession is preceded by either an oil shock or a Fed's tightening its monetary policy.

Many of us are familiar with the VIX Index, commonly referred to as the “Fear Index”.  The VIX Index is a measure of “fear” as that relates to equity markets and typically rises during periods of falling prices, sometimes sharply during more precipitous declines.   Move Index Did you know there's an index that gauges fear in the bond market? Originally created by Merrill Lynch, it's now called the  ICE BofAML  MOVE  Index . This index measures how much investors expect interest rates to fluctuate. When there's worry about rising rates, the index goes up. It climbed sharply during the 2013 Taper Tantrum, reflecting heightened concerns about interest rate increases. The index rises as concerns grow that interest rates are on the march higher. The index will rise more sharply when there are fears in the market that rates may be headed significantly higher as was the case during the 2013 Taper Tantrum. Key Points to Understand: Implied Volatility: The MOVE Index...