Markets that fall as dramatically as this one has the last couple days tend to bounce. The conventional wisdom is that there is usually some sort of a retest of the lows before a solid low is formed but in recent years V-shaped bounces have become more common.
One of the main reasons that there have been more V-shaped recoveries is because the moves are driven by central bankers and liquidity rather than technical patterns and fundamentals. Central banks produce one-way movement as fear of missing out drives the current action.
This market has seen some bounce today but it is very nervous action. There is a very high sensitivity to the headlines. A couple of negative headlines caused a quick drop but there are some signs of support.
While the chances of more bounce action here are high, I do not believe this market is going to recover quickly or easily this time. Even if central banks ride to the rescue there is just too much uncertainty about COVID-19 for the market to look past it. This is a potential black swan event which means it is an extremely rare event. The cost of not being ready for it is so great that it is important to be extremely cautious.
Many market participants are quick to conclude that the danger of COVID-19 is overblown but this is clearly a highly unusual event and even if the chances of a profound negative impact are small, there is enough risk that we can't blithely put precious capital at great risk.
The tipping point in this crisis will come if there is an expansion in the number of cases in the U.S. The German Health Minister said early that Germany is at the beginning of a coronavirus epidemic even though there has only been a small number of cases reported there with just one critical.
The important issue right now is to not be very trusting of bounces. While there are good chances of them due to technical reasons, the news flow suggests that there are more shoes to drop. The risk that this is a black swan event is just too great to trust that the crisis is going to totally conclude very abruptly.