has the stock market hit bottom: indicators & guide

This guide explains what investors mean by “has the stock market hit bottom,” the main signals analysts watch (VIX, moving averages, breadth, credit spreads, macro data), why no single metric suffi...

2025-09-02 00:04:00

By Emma Shah

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Has the stock market hit bottom?

The question "has the stock market hit bottom" asks whether U.S. equity markets have finished their decline and begun a sustainable recovery. This is one of the most common — and hardest — market-timing questions investors ask. No single indicator can definitively answer it: professionals combine technical signals, sentiment gauges, macro data, credit markets and historical patterns to reach a view. This article explains the commonly used evidence, their limits, and practical actions investors often take when the bottom is uncertain.

Definitions and scope

Before reviewing indicators, clear definitions help avoid confusion.

Bottom: the lowest price point of a market drawdown before a sustained recovery. A bottom is typically confirmed only in hindsight after prices move materially higher.
Correction: a pullback of roughly 10% from recent highs in an index such as the S&P 500.
Bear market: commonly defined as a decline of 20% or more from a prior peak.
Capitulation: a sharp spike in selling pressure and fear when many participants exit positions; often visible in extreme volume and sentiment gauges.
V-shaped / W-shaped recovery: post-bottom price patterns. V-shaped = rapid decline followed by quick recovery. W-shaped = a recovery that fails and retests lows before finally advancing.

Scope: this article focuses primarily on U.S. equity markets (S&P 500, Nasdaq) and liquid large-cap stocks. Methods below apply differently to smaller-cap, less-liquid equities and structurally different markets such as many cryptocurrencies, which typically show higher volatility and weaker breadth measures.

Why determining a bottom is difficult

Markets are forward-looking and price in expectations about growth, earnings, central-bank policy and shocks. Several reasons make bottoms hard to call:

Information asymmetry: insiders, algorithmic desks and large institutional flows can move prices before broad indicators show the change.
Forward-looking pricing: markets reflect expectations, not current-state facts. A single economic print does not by itself define whether the trough has passed.
Confirmation bias and hindsight: many indicators only look reliable after the market has recovered, producing apparent post-hoc clarity.
Divergent indicators: technical, sentiment and macro signals often disagree for weeks or months.

Because of these factors, most professionals use a combination of indicators and manage risk instead of trying to call exact bottoms.

Common indicators used to assess whether a bottom has occurred

Analysts and strategists rarely rely on one signal. Below are the main classes of indicators and how market participants interpret them.

Volatility measures (VIX)

What it is: the Cboe Volatility Index (VIX) estimates expected 30‑day volatility for the S&P 500 from option prices. It is often called the market’s “fear gauge.”
How it’s used: large spikes in VIX are associated with panic and potential capitulation. Some strategists treat an extreme and rapidly falling VIX as a contrarian buy signal.
Case example: As of Apr 15, 2025, Business Insider reported Fundstrat’s Tom Lee highlighting a VIX spike‑then‑drop pattern (a rapid peak followed by a sustained fall below a threshold) as consistent with past short-term bottoms. Tom Lee’s heuristic looks for a high VIX reading during the worst leg of the selloff and a subsequent calming of volatility as buyers return.
Limits: VIX spikes can be short-lived, and a falling VIX does not guarantee the economy or earnings will improve. VIX is one input among many and can lag localized risk in other asset classes.

Technical trend indicators (moving averages, death cross)

Moving averages: common windows are the 50‑day and 200‑day simple moving averages (SMA). A market trading back above these averages may indicate trend improvement.
Death cross / golden cross: a “death cross” occurs when the 50‑day SMA crosses below the 200‑day SMA; a “golden cross” is the reverse. The death cross is widely reported as bearish but is not a fail‑safe timing signal.
Historical context: As of Apr 14, 2025, Reuters covered the S&P 500’s recent death cross and quoted analysts noting many death crosses happen after the steepest declines have already occurred. Historically, some death crosses have preceded prolonged weakness, while others coincided with recovery after the worst selling was over.
Limits: moving averages are lagging indicators and can produce false signals in choppy markets. Many severe selloffs occur before a death cross completes; thus the cross may confirm a trend rather than predict the absolute bottom.

Market breadth and volume

Breadth metrics: advance/decline (A/D) lines, the number of stocks making new lows vs. new highs, and the percent of S&P constituents trading above key moving averages.
Volume confirmation: technical analysts look for rising volume on up days and relatively lighter volume on down days as evidence that buyers support higher prices.
Why it matters: breadth tells you whether gains are broad‑based or concentrated in a few large stocks. A market where only a handful of megacaps rise while most names lag suggests a fragile recovery.
Practical reading: MarketWatch (Mar 13, 2025) listed breadth and volume among six charts to watch when judging whether a correction is turning into a durable bottom.

Option-market sentiment (put–call ratio)

Put–call ratio: the volume or open interest of put options divided by call options provides a snapshot of option‑market bias.
Interpretation: spikes in the put–call ratio often signal heightened bearish positioning and can indicate panic selling — potential signs of capitulation. Conversely, extremely low ratios may signal complacency.
Caveats: options strategies can obscure raw readings (e.g., hedging, income selling). The put–call ratio should be read alongside other sentiment metrics.

Credit and fixed‑income signals (credit spreads, Treasury yields)

Credit spreads: the yield premium investors demand to hold junk or high‑yield bonds vs. Treasuries widens in stress. Rapid spread widening signals financial stress and can presage deeper equity weakness.
Treasury yields: falling Treasury yields often reflect risk‑off flows and recession fears. Conversely, a rising yield driven by growth expectations can indicate diminishing recession odds.
Interpreting the mix: MarketWatch and Reuters coverage in 2025 emphasized that dislocations in credit markets often precede or accompany major equity declines. Tight credit spreads during a selloff can mean markets have not fully priced economic risk; wide spreads suggest risk is being priced in and may increase the probability of further equity downside.

Macro and policy indicators

Economic data: GDP growth, payrolls, industrial production, retail sales and inflation prints affect corporate earnings outlooks. A string of weak macro prints may prolong or deepen a market drawdown.
Central‑bank policy: rate hikes, forward guidance and the market’s expectation of cuts materially change equity valuations. A pivot from hawkish to dovish guidance can help markets bottom.
Government actions and shocks: fiscal responses, trade disruptions, or major regulatory shifts can alter both the path of earnings and risk appetite.

Historical patterns and precedents

History does not repeat exactly, but past drawdowns illustrate how bottoms have formed.

2008–2009 (Global Financial Crisis): a long, deep bear market with a bottom confirmed only after months of deteriorating credit conditions and policy interventions. Recovery took years to fully erase losses for many sectors.
2020 (COVID‑19 shock): an abrupt, fast crash followed by a sharp V‑shaped rebound after unprecedented monetary and fiscal stimulus. The speed of the trough and recovery was unusual and driven by policy and liquidity.
Other episodes: many corrections and bear markets have intermediate rebounds (bear‑market rallies) that look like recoveries but fail to hold. CNN Business (Apr 24, 2025) summarized how different bottoms can take different shapes and timeframes.

These precedents illustrate the point: bottoms can be deep and prolonged, quick and V‑shaped, or choppy with multiple tests.

Analyst and strategist viewpoints — case studies

Below are representative analyst frameworks drawn from recent reporting. None offer certainty; they demonstrate how pros synthesize signals.

Tom Lee / Fundstrat (VIX‑based): As of Apr 15, 2025, Business Insider reported Tom Lee highlighting a VIX spike‑then‑drop pattern consistent with prior short‑term bottoms. Lee combined the VIX signal with breadth and macro checks to estimate potential S&P targets, but stressed the need for confirmation across indicators.
Death cross commentary: As of Apr 14, 2025, Reuters noted analysts cautioning that the death cross is often a late, lagging sign — many of the worst declines have already occurred when the cross happens. Some technical strategists therefore watch the cross as confirmation rather than a leading bottom signal.
Mixed signals and context: In April–July 2025, Reuters and other outlets reported that while some technical and sentiment gauges suggested a short‑term trough, credit markets and certain economic data remained mixed. These differing signals produced wide analyst dispersion on whether a durable bottom had arrived.

How to interpret conflicting signals

Indicators diverge for three common reasons:

Different time horizons: a short‑term trader may focus on intraday volatility and VIX; a long‑term investor prioritizes fundamentals and credit conditions.
Structural concentration: rebounds driven by a few megacap names (e.g., the largest tech names) can mask weakness across the broader market.
Lagging vs. leading data: moving averages and breadth measures may lag, while real‑time option flows or credit spreads can lead.

Weighing signals:

Look for convergence: when multiple indicator classes (volatility, breadth, credit, macro prints) trend toward improvement, the confidence that a bottom occurred rises.
Use time and price confirmation: a common rule is to wait for a sustained price move above a key moving average and improving breadth over several sessions or weeks.
Align with objectives: short‑term traders may act on quicker confirmations; long‑term investors may focus on dollar‑cost averaging and position sizing rather than trying to time the exact bottom.

Practical guidance for investors (no investment advice)

When the question "has the stock market hit bottom" remains open, many investors follow pragmatic risk‑management approaches:

Short‑term traders: consider tighter position sizing, clear stop rules, and relying on technical confirmations (e.g., closing above a key moving average with strong breadth).
Long‑term investors: dollar‑cost averaging into allocations reduces the risk of poor market timing. Historical data shows that missing the strongest rebound days materially reduces long‑term returns; gradual buying helps avoid both missing a bottom and buying right before a deeper dip.
Fixed‑income and diversification: review allocations to credit, Treasuries and alternatives to reflect changing macro risk.
Avoid panic selling: forced selling can crystallize losses. Maintain a written plan and use risk controls rather than emotional responses.

Investopedia’s practical guides and MarketWatch’s checklist both emphasize process over prediction: define your horizon, set rules, and measure outcomes.

Differences between equities and other markets

Signals that work for large‑cap U.S. equities often translate poorly to other asset classes:

Cryptocurrencies: far higher volatility, thinner liquidity in some tokens, and weaker breadth metrics make options‑based or moving‑average signals less reliable. On‑chain metrics (active addresses, transaction volumes) and institutional flows (ETF inflows where applicable) are more informative for crypto.
Small‑cap or emerging‑market equities: credit and macro indicators can be more dominant; local liquidity and political/regulatory risk can produce false bottoms.

When considering non‑equity markets, use asset‑specific indicators and prioritize risk management.

Limitations and common pitfalls

Overreliance on single indicators: a single signal (e.g., VIX falling) can be misleading if credit spreads remain wide and macro data deteriorates.
Hindsight bias: many signals appear convincing after a market has already recovered. Beware of post hoc narratives that make a past bottom look obvious.
Media narratives and confirmation bias: headlines amplify simple stories (e.g., "death cross" or "VIX signals bottom"). Professional frameworks combine multiple inputs and remain humble about certainty.
False bottoms: bear‑market rallies can produce convincing gains before a renewed decline; traders calling a bottom after such rallies risk being caught if the market retests lows.

Frequently asked questions (FAQ)

Q: Can anyone consistently call the bottom? A: No credible evidence shows anyone can consistently time bottoms across cycles. Many pros aim to improve odds by synthesizing multiple indicators and managing risk.

Q: What if I miss the bottom? A: Missing the exact bottom is common. Dollar‑cost averaging, maintaining a long‑term allocation plan, and focusing on diversification are common responses.

Q: Which single metric is most reliable? A: There is no single most reliable metric. VIX, breadth, credit spreads and macro data each add information. The best practice is to look for alignment across several classes of indicators.

Q: How long after a VIX spike should I wait to consider buying? A: There is no universal rule. Some contrarian approaches wait for VIX to peak and begin a sustained decline, combined with price and breadth confirmation. Others use staged entries over weeks.

Q: Are death crosses meaningful? A: They are meaningful as lagging confirmations of weakened trends but often occur after the worst selling has happened. Treat them as one data point among many.

References

Business Insider — "Stock market has bottomed as VIX decline mirrors 2008, 2020: Tom Lee" (Apr 15, 2025). As of Apr 15, 2025, Business Insider reported Tom Lee’s VIX‑based framework as a signal some strategists used to argue for short‑term lows.
Reuters — "S&P 500's 'death cross' may not be as ominous as it sounds, analysts say" (Apr 14, 2025). As of Apr 14, 2025, Reuters covered the debate about moving‑average crossovers and their timing.
CNN Business — "Has the stock market hit bottom? History is a guide" (Apr 24, 2025). As of Apr 24, 2025, CNN Business published a historical perspective on how bottoms have taken different shapes.
MarketWatch — "Are we now in a stock‑market correction, pullback or bear market? Here are 6 charts to watch." (Mar 13, 2025). As of Mar 13, 2025, MarketWatch highlighted breadth and volume among key charts.
Investopedia — "3 Ways to Tell If Your Stock Has Bottomed" (reference guide).
Reuters / The Motley Fool / Morningstar — assorted historical and market‑structure pieces cited for context.

Practical next steps and where Bitget fits in

If you are tracking whether the market has bottomed:

Build a checklist of the signals above (VIX, breadth, moving averages, credit spreads, macro). Seek convergence across them rather than relying on one.
For crypto holdings or on‑chain assets, use asset‑specific metrics (on‑chain volume, ETF flows, active addresses). When using wallets, consider Bitget Wallet for self‑custody and seamless connections to Bitget products.
If you use a trading platform, remember that order execution and tools matter. For spot, derivatives and managed products, Bitget provides a range of tools and risk controls suited for different horizons (check your account features and documentation for specifics).

Further explore Bitget’s educational content and wallet options to learn how to manage entries over time, use risk controls and monitor market signals.

Keep in mind: this article is educational and does not provide investment advice. Use verified market data and your own risk assessments when making decisions.

Explore more: Understand indicators, track VIX and breadth, and consider process-driven strategies. To manage crypto exposure securely, consider Bitget Wallet and Bitget’s platform features for research and execution.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.