The markets are up after a 10% correction, but the question many investors have now is – is a V-bottom in place?
2020 has been a unique and difficult year for markets worldwide, as the COVID-19 pandemic caused a tremendous amount of volatility. After the onset of the pandemic, the markets experienced one of the longest and steepest downturns in history, as major indexes lost around 30-35% of their values. However, investors were relieved when the markets entered into a recovery phase, as major stock indices gained back as much as 50% of the losses incurred in the past few months.
Recently, the markets experienced a 10% correction, as fears of a potential resurgence of the virus jolted investors. This correction was seen as a buying opportunity by many investors, and subsequently, the markets started to rally soon after. This rally induced investors to believe that a V-bottom may be in place, signalling a sharp reversal of the downturn experienced earlier this year. It is important to note, however, that V-bottoms typically form during bear markets, and this year we have not seen a severe bear market. In addition, the market recovery in this case is being fuelled by the easing of pandemic-induced restrictions on businesses, rather than a fundamental recovery in corporate profits. Therefore, it is difficult to determine whether a V-bottom is in place.
In order to gain more insight into the formation of a V-bottom, it is important to look at the volume and momentum of the markets. Volume typically increases as a market starts to bounce back from the bottom of a V-bottom formation, so this is an indicator that traders will be watching closely. In addition, the momentum of the markets will need to accelerate significantly for a V-bottom to be in place, and we need to observe a steady trend towards further gains.
Overall, the markets are up after the 10% correction, but it is difficult to determine whether a V-bottom is in place. Investors will need to keep a close watch on the volume and momentum of the markets, as these are key indicators of whether a V-bottom is in formation. Ultimately, only time will tell if a V-bottom has indeed formed and the markets are set for a sustained recovery.
The markets are up after a 10% correction, but the question many investors have now is – is a V-bottom in place?
2020 has been a unique and difficult year for markets worldwide, as the COVID-19 pandemic caused a tremendous amount of volatility. After the onset of the pandemic, the markets experienced one of the longest and steepest downturns in history, as major indexes lost around 30-35% of their values. However, investors were relieved when the markets entered into a recovery phase, as major stock indices gained back as much as 50% of the losses incurred in the past few months.
Recently, the markets experienced a 10% correction, as fears of a potential resurgence of the virus jolted investors. This correction was seen as a buying opportunity by many investors, and subsequently, the markets started to rally soon after. This rally induced investors to believe that a V-bottom may be in place, signalling a sharp reversal of the downturn experienced earlier this year. It is important to note, however, that V-bottoms typically form during bear markets, and this year we have not seen a severe bear market. In addition, the market recovery in this case is being fuelled by the easing of pandemic-induced restrictions on businesses, rather than a fundamental recovery in corporate profits. Therefore, it is difficult to determine whether a V-bottom is in place.
In order to gain more insight into the formation of a V-bottom, it is important to look at the volume and momentum of the markets. Volume typically increases as a market starts to bounce back from the bottom of a V-bottom formation, so this is an indicator that traders will be watching closely. In addition, the momentum of the markets will need to accelerate significantly for a V-bottom to be in place, and we need to observe a steady trend towards further gains.
Overall, the markets are up after the 10% correction, but it is difficult to determine whether a V-bottom is in place. Investors will need to keep a close watch on the volume and momentum of the markets, as these are key indicators of whether a V-bottom is in formation. Ultimately, only time will tell if a V-bottom has indeed formed and the markets are set for a sustained recovery.
