FXStreet (Delhi) – Research Team at BBH, suggests that given the dramatic start to the year, it makes sense to consider what kind of bottom is likely to form in the equity markets. Key Quotes “An “L”-shaped bottom seems to imply that the price action has been driven by recognition of a deterioration of fundamentals. Subjectively, we would give this the lowest possibility. At the same time a “V”-shaped bottom, we think, does not give proper due to the fragility of the global economy, earnings challenges, and the extent of the recovery since 2009. We see a “W”-shaped bottom as most likely. It gets to the idea that a bottom has to be carved out, and recognizes that some will sell into the initial bounce. We apply this logic in three major equity markets. The Nikkei gapped lower today. The gap is found between Monday’s low near 16922 and today’s high near 16839. If that is a normal gap, it will be filled in the next day or two. On the downside, the 16612 area is a 50% retracement of the bounce off the January 21 low. A break of 16472, the 61.8% retracement would warn a durable low is not in place. The DAX gapped today but has recovered to close the gap, though it is still lower on the day. At its lows, the DAX retraced 50% of the bounce from January 20. The recovery today after the poor start keeps the technical condition still constructive. The S&P 500 may open near yesterday’s lows. The 1872 area corresponds to a 38.2% retracement of last week’s recovery. The 50% retracement is near 1860.5. Provided the 1849 area (the 61.8% retracement) holds, the correction would be intact.” For more information, read our latest forex news.