According to market lore, a pullback of greater than 20% is considered a bear market. Of course, this is fuzzy especially in instances, when the market doesn't spend too much time below this level.
And, this may be the case as the S&P 500
However, stocks staged a late-day, nearly 2% reversal from the lows which continued in Monday's session with stocks more than 2% higher. Naturally, this is leading to hopes that the market may have bottomed.
And, there are certainly some notable positive developments over the past week which are supportive of the notion that the worst may be over for stocks.
Let's recap 3 of the most meaningful:
Bonds
One reason that this selloff has been so tough is that bonds and stocks were both falling. Typically, bonds catch a bid when equities are weak. This pushes rates down which starts making equities more attractive, providing some support for the market.
This is not the case in a high-inflation, hawkish Fed environment. However, bonds finally found a bid despite a hot inflation report. It seems consistent with a downgrade in inflation expectations and increased growth concerns.
Growth Stocks
Another concern for the market was the price action in speculative, growth stocks that were plunging lower. This was increasing the odds of some sort of blowup among hedge funds that were heavily invested which could cause domino effects and selling in other areas.
So, it's a relief that they did find a bid Thursday morning and are moving higher in Friday's session. This group doesn't necessarily have to rally for the market to move higher, but it does have to find some support which seems to be the case.
Sentiment
The final, marginally positive development is that sentiment has reached extreme bearish measures which marked turning points in previous corrections. This is evident with the Fear/Greed Index hitting single-digits or surveys showing bulls at extreme lows and bears at highs.
It's showing up in volume too as many stocks are seeing nearly double or triple their daily volume during these selloffs which is indicating that a tremendous amount of shares are being exchanged.
This is the type of sentiment and price action that is necessary for a sustainable market bottom.