We could be close to a major bottom in stocks right now… based on history.

Consumer confidence is terrible… And historically, the stock market bottoms at about the same time consumer confidence bottoms.

Here’s a 50-year chart of the stock market versus consumer sentiment (as measured by the University of Michigan). As you can see, whenever consumer confidence drops quickly, the stock market bottoms. Take a look…

It’s astounding to me that consumer confidence is as bad as it is right now…

Based on this measure, consumer sentiment is as bad as it was at the bottom in late-2008/early-2009. Consumer confidence has been significantly worse by this measure only once… in 1980. After the 1980 bottom, we saw the greatest two decades in the history of stocks.

[ad#Google Adsense 336×280-IA]The other major measure of consumer confidence is saying the same thing…

The Conference Board’s measure of consumer confidence has only bottomed at a lower level than today twice in history – December 31, 1974 and February 29, 2009. In both cases, stocks soared over 40% in the following six months.

The question is: Did consumer confidence just hit a bottom? Or can it still go lower?

The answer is: I don’t know. You can’t use consumer confidence as a trading signal… It doesn’t tell us the exact date of the bottom.

But it does let me know that we are close to a bottom… based on history.

Even better, history tells us stocks are also cheap right now. So we have two of the three things we look for before piling into an investment… Stocks are 1) cheap and 2) hated (as consumer confidence is low). We are just missing the uptrend.

It’s about to be an incredible time to be an investor… But we’re not quite there yet.

Hopefully, we’re experiencing the worst of it right now… Consumer confidence is as bad now as it’s been at any time in the last 50 years. Hopefully, we’re looking at the lows in the market.

History doesn’t repeat exactly in the financial markets… But it does rhyme. If this is the bottom in consumer confidence, solid gains in stocks should lie ahead…

Good investing,

— Steve Sjuggerud

[ad#jack p.s.]

Source:  Daily Wealth