“There is no doubt some of the names that have been destroyed in the past week were driven there by force selling and fear,” said Nathan Thooft, Manulife Investment Management’s head of global asset allocation. “And we are now seeing some people take a step back and say, ‘Wait, these names are not going away.”’

That the bull-market milestone it came just hours after the government reported an unprecedented surge in the number of Americans seeking jobless benefits underscores how fragile the rally may be. The U.S. economy is in tatters after large regions of the country shut down to help prevent the spread of the deadly coronavirus.

Market optimists point to both monetary and fiscal stimulus as reasons for the sharp comeback, though a large swath of investors would be quick to say that massive rallies happen in the deepest of bear markets. With stocks facing trading halts or limits in 10 of the last 12 days, conditions haven’t necessarily been orderly or calm.

The steep decline that brought the Dow down 37% from a record resembled a “waterfall decline,” according to strategists at Ned Davis Research, marked by persistent selling over weeks, surges in volume, and a collapse in confidence. While no two scenarios are the same, usually such fast falls see the lows tested again.

Of 13 similar plunges since 1929, nine of them saw the Dow break the initial lows. And of the four instances in which the benchmark didn’t fall to fresh lows, it at least retested the bottom in three of them. The only exception was the most recent case: December 2018.

“We caution against recency bias,” wrote strategists including Ed Clissold. “The temptation is to breathe a sigh of relief that the waterfall is over and jump back into the market. History suggests that a more likely scenario is a basing and testing period that includes a breaching of the waterfall lows.”

This article was provided by Bloomberg News.

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