Critical Week for Global Stock Markets and Economic Recovery

According to recent research from JP Morgan, the next week or so could be an important period of time for the stock market.

This research is based on the S&P 500's intraday low of 838 on October 10, which had been the index's lowest point prior to Thursday's intraday low of 818.

JP Morgan examined more than a century of bear markets to look for recovery patterns and came up with a few interesting observations. It found that market bottoms are almost always retested, and that such retests result in a new low about 40 percent of the time.

History shows that three-quarters of the retesting events occurred within 44 days of a bottom, so if the October 10 low in fact marked a bottom, a retest (which could create a new low) should be expected prior to November 23.

The longest span for retesting a low was 104 days in 2002. A repeat of that extreme case would schedule the retest for January 22, 2009.

Of course, JP Morgan makes no promises that October 10 is the pivotal date. One of its causes for concern is market volatility, as measured by S&P's intraday swings. As an example, Thursday's swing – a high of 913 and the 818 low – was more than 10 percent of the index's value.