Identifying Market Bottoms Across Cycles

"Nobody can time the bottom." Are you sure?

Where is the bottom?

This is a common question, and one we’ve all heard lately.

Buying a bottom is not the same as catching a falling knife. They are two very different things.

The best opportunities and strongest trends tend to come after major selloffs. It’s likely that on the other side of this one, whenever that may be, we’ll see a clean uptrend with plenty of opportunity.

But you need to survive the chop and messy price action long enough to capitalize.

In times like this you don’t want to get chopped up and drain both your mental and fiscal capital. Instead, it’s best to trade smaller and prepare for the eventual turn. If you can avoid the chop and the bulk of the downtrend but then capitalize on the uptrend when it comes, the time sitting on the sidelines will be well worth it.

And that’s the goal here.

Although buying the bottom isn’t important, being able to identify a bottom can be important. If you can spot a potential bottom forming, you can begin to increase sizing and position ahead of the herd.

But the issue is that identifying a bottom can be difficult.

If you don’t know what to look for…

In April 2025, I posted the following:

What’s important isn’t that I “called the bottom” and that’s not meant to be the takeaway here. The takeaway is that there were elements and conditions forming a bottom that led me to the conclusion that it was time to buy.

Are we getting closer?

This morning at 12:29PM EST, I let subscribers know via the subscriber chat that I took three new positions. 10 minutes later, we got news that sent the markets spiking.

“Today has felt different up to this point so throughout the morning I’ve added some new exposure…”

But what does that feeling mean?

In the remainder of this piece I’m going to discuss exactly what I look for to identify a potential bottom in the indices, real annotated chart examples of relevant and important bottom formations throughout the 2000s with thorough explanations, how you can trade and play against a potential bottom, and much more.

This is probably my favorite article I’ve written so far, and I think it might be my most useful.