02/10/2026
Has the Market Bottom Arrived? Is It Time to Deploy New Money?
(This article is intended for investors looking to deploy a large lump-sum investment. It is not intended for regular monthly DCA plans.)
On 1 October, the NYSE Composite Index closed higher and formed a Hammer candlestick pattern on above-average volume.
Could this mark a market bottom?
Possibly — but one day does not confirm a bottom.
I am using the NYSE here primarily as a proxy for the health of the broader market. Because the NYSE covers a broad range of stocks, what happens beneath the surface can give us valuable clues as to whether overall market conditions are becoming healthier and whether it may be time to start deploying new money.
This does not necessarily mean investing in a fund that tracks the NYSE. Instead, I would use the information from the NYSE and its market-breadth indicators to help determine when to increase exposure to broader equity investments such as the MSCI ACWI or S&P 500.
What Happens From Here?
There are two possibilities.
First, the NYSE could rally from here and subsequently pull back, forming a “higher low.” This would provide a more reassuring entry point because the market would be giving us additional evidence that selling pressure has been exhausted.
Second, the market could simply take off from here. If we wait for the perfect entry point, the safer pullback we are hoping for may never arrive.
This creates a dilemma: How do we participate if the bottom is already in, without taking excessive risk if we are wrong?
Position Sizing Is the Key
One approach would be to deploy an initial portion of the available capital — say 30% — while maintaining a predefined risk limit.
For example, if the investment has a 5% stop-loss, the maximum risk to the total portfolio from that initial position would be approximately:
30% position × 5% stop-loss = 1.5% portfolio risk.
If the market subsequently proves us wrong, the potential damage to the overall portfolio is therefore relatively contained.
If the market proves us right, we can progressively increase our exposure as the evidence improves.
This is particularly relevant when deploying a large lump sum. Rather than trying to identify the exact bottom and investing 100% at once, we can allow the market to earn the right for us to take more risk.
What Would Give Me Greater Confidence?
I would not rely on the Hammer pattern alone.
I would also be watching the NYSE Advance-Decline Line, the percentage of NYSE stocks above their 50-day moving averages and, importantly, the NYSE McClellan Summation Index (NYSI).
If these breadth indicators begin to turn higher, it would suggest that the improvement is spreading beyond a small number of large-cap stocks.
That would give me greater confidence that the overall health of the market is improving — and potentially justify progressively deploying more capital into investments such as the MSCI ACWI , S&P 500 or US Small Caps
We Don't Need to Catch the Exact Bottom
For me, the objective is not to predict the exact market bottom.
The objective is to identify when the risk–reward equation has become sufficiently attractive to start taking risk again.
If 1 October proves to be the bottom, an initial position allows us to participate.
If the market rallies and subsequently forms a higher low, we have an opportunity to add.
If the market falls and our thesis is wrong, disciplined position sizing and risk management help keep the loss manageable.
Start small. Let the market confirm and switfly increase exposure as the evidence improves.
That is how I would approach deploying a large lump sum at this stage of the market.
