How to be self sufficient and constantly developing

How do I know when the S&P 500 index (the market) has bottomed?

On the way down, bullish chart patterns disappear. For example, you do not see a double bottom confirming (price rising above the peak between the two bottoms) when a stock continues making new lows. When the market bottoms, bullish chart patterns appear, but that is not the time to buy. Those patterns will have upward breakouts, sure, but many will fail soon after when price reverses (heads back down). The market has not begun trending, and it is a dangerous time to trade. Bad news pushes the market lower, almost daily.

Eventually, price will level out. You will see many basing patterns, such as rectangles. Bad news that used to drive the market down by hundreds of points in a single day hardly budges it now. You will see many bullish chart patterns forming, such as double bottoms, head-and-shoulders bottoms, and triple bottoms, as if individual issues are just begging to move higher, but there is still some hesitation. Those with upward breakouts will have price continuing to rise in a nervous stair-step move. Before, one low followed another but now, price makes higher valleys and higher peaks in many securities. That is the time to buy.

Remember that the market looks ahead six months, so even though you hear bad news, the market may move up anyway, shrugging off the news and bursting upward on good news.

One other tip. I would avoid trading high and tight flags. After an extended market drop, or a short but severe one, stock prices will quickly double, forming a high and tight flag. Many of those will see price collapse instead of confirming the chart pattern. Even if they do confirm (a close above the flagpole or pattern high), they’ll reverse quickly. You won’t see price move up another 100%. You’ll be lucky to see it move higher by 10% to 15%. Many will just drop immediately.