Here's how to tell the bottom of this bear market is in and a new bull is here

Published Thu, Mar 19 20202:35 PM EDT

Key Points

Bank of America Securities curated a "bull market checklist" for clients to help predict when stocks might reverse course. The list of six signals are events that typically happen before a market trough.
Currently, four of the six signs are triggered, meaning are market bottom could be near.
In the context of the current global pandemic, the most important new bull market checklist item is a peak in the number of new coronavirus cases daily, according to Bank of America.

Trying to time this volatile, falling market can be dangerous, but there are certain signals that the professionals look for to gauge when a bottom might be coming. Bank of America Securities curated a "bull market checklist" for clients to help predict when stocks might reverse course. The list of six signals are events that typically happen before a market trough. "The more signals triggered, the greater the likelihood we are at the S & P 500 market bottom," Bank of America equity and quant strategist Savita Subramanian said in a note to clients on Thursday. Currently, four of the six signs are triggered, meaning are market bottom could be near. Stocks dropped violently in the past month on fears of the economic ramifications of the fast-spreading coronavirus. All three major averages are deep in bear market, more than 20% off their most recent high. These major moves put an end to the longest stock market expansion in U.S. history. Here's Bank of America's full bull market checklist Federal Reserve lowers interest rates Loosening credit conditions Earnings revisions rebound Economic indicators start to a rebound, including PMI, inflation, and GDP forecasts Higher investment risk appetite globally Investor cash levels above 5% Bullish signs to watch Before a market turnaround, the Federal Reserve typically lowers interest rates, by more than 50 basis points. On Sunday, the Fed slashed interest rates to zero, to a range of 0% to 0.25% down from a previous target range of 1% to 1.25%, in order to combat the economic impact of the virus. The central bank said "the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States," as it lowered rates to levels not seen since the Global Financial Crisis. Another bullish signal is when analysts start to revise their earnings pictures for beaten down companies. Bank of America measures the ratio of consensus earnings cuts and increases for the S & P 500. When the three-month earnings revision ratio reaches or crosses below 0.5, signaling at least twice as many cuts as increases to S & P 500 consensus estimates, this is a sign of a bear market. When the ratio starts to rebound, it could put a floor on the market tailspin. "A rising ratio indicates an improving economic cycle," said Subramanian. The ratio just came up to 0.5 on Tuesday, moving in a bullish direction. Typically stocks rebound when there is a higher investment risk appetite globally. Bank of America's measure for this, the Global Financial Stress Index, or the GFSI, measures risk by solvency, volatility and liquidity. When the index crosses above 1.5, trading volumes and funds flows show a higher risk appetite from investors around the world. The index is currently at 2.1, a bullish level. Typically, when fund managers are holding little cash, it's bullish for equities; however, Bank of America said it can be a contrarian measure. Therefore, when fund managers are hunkering down with cash positions above 5%, the firm says its a sign they've gotten overly cautious so a bull market is set to begin. The Bank of American Fund Manager Survey shows cash positions around 5.1%. Bearish signs to watch Loosening credit conditions is a sign that a bull market could be coming. When banks are more willing to lend money its likely is a time of stronger economic health. The final signal, tracks eight macroeconomic indicators in Bank of America's U.S. Regime Indicators index. When a handful of indicators, including PMI, inflation, GDP forecasts, start to improve, it's likely stocks will bottom. When the regime indicator crosses below -1 before inflecting higher, the bull market signpost is triggered. The indicator is currently at -0.6. GDP forecasts are looking dismal for the first half of 2020, with economists at JPMorgan estimating second quarter GDP could fall 14%. Coronavirus in focus In the context of the current global pandemic, the most important bull market checklist item is a peak in the number of new coronavirus cases daily, according to Bank of America. The Federal Reserve and fiscal stimulus are widely seen as market panaceas, but "so far they have not been particularly potent. In a pandemic, new cases matter," said Subramanian. "During the SARS epidemic in 2003, the number of daily global confirmed cases peaked in mid-April, with both the Shanghai (SHCOMP) and Hong Kong (HSCEI) index troughing shortly after," Subramanian added. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world. — with reporting from CNBC's Michael Bloom.

More wealthy investors are going to cash and expressing doubts about the strongest parts of the market, including tech, but the bulls are still in the majority, according to a Q2 2021 E-Trade survey.

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Trying to time this volatile, falling market can be dangerous, but there are certain signals that the professionals look for to gauge when a bottom might be coming.

Bank of America Securities curated a "bull market checklist" for clients to help predict when stocks might reverse course. The list of six signals are events that typically happen before a market trough.

"The more signals triggered, the greater the likelihood we are at the S&P 500 market bottom," Bank of America equity and quant strategist Savita Subramanian said in a note to clients on Thursday. Currently, four of the six signs are triggered, meaning are market bottom could be near.