Down Arrow Button Icon

Which side of the Street are you on?

While many on Wall Street see the current turmoil as an overreaction, others have begun to worry there’s no cure for what’s ailing stocks. Major indices plunged over 10% last week in the biggest one-week sell-off since 2008. And although indexes saw something of a (meager) rally this week, markets have been topsy-turvy in their move lower, with the Dow barely up 0.5% from Monday. A Fed rate cut of 50 basis points on Tuesday once more stoked worries about the state of the economy, and U.S. ISM manufacturing data on Monday is showing some signs of weakness, hovering just above contractionary levels (at 50.1 for February, down from 50.9 the month before).

“The outlook is uncertain, or rather certainly bearish in the near term as quarantining spreads around the world, but with considerable doubt as to the duration and depth of the economic fallout,” strategists at MRB Partners wrote in a note.

But is last week’s massive sell-off enough to signal a bear market is on its way? For many analysts, the answer is: not necessarily.

“The U.S. and global economy looked like it was turning up, so that should provide a little bit of a buffer to push against some of the slowdown,” says Mark Hamrick, senior economist at Bankrate.com.

But even if we are to see a bear market plunge in the coming weeks or months, those like Northwestern Mutual’s Brent Schutte note that bear markets that don’t coincide with a recession are typically sharp, but short. “I would still believe it’s more the latter” this time around if we are to see one, he says.

According to Hamrick, we’re seeing a “bit of a ‘sell first and ask questions later’ kind of a mentality” in the markets. To wit, Hamrick thinks “It’s not a slim possibility” that we could see a 20% drop in securities (a technical bear market), as he believes “tail risks are elevated at this point and it could go either way.”

What to watch

One of the biggest things to keep an eye on, say analysts, is the new case count of the coronavirus.

Last year, Northwestern Mutual’s Schutte says he would wake up every morning and read President Trump’s tweets to gauge what might happen in the markets. Now, “I wake up every morning now and look at the daily new cases to think about how the coronavirus may impact the market.”

In light of the correction last week, sparked by new cases in more countries worldwide, analysts say the rate and spread of new cases of coronavirus is going to be a key sign to watch. (There are currently 225 confirmed cases in the U.S. in at least 16 states, and over 100,000 cases around the globe, including now 163 cases in the U.K.)

“There’s some increased tail risks,” BMO Wealth Management’s chief investment strategist Yung-Yu Ma tells Fortune. “Europe is not just Italy–France, Germany, and Spain are also starting to accelerate their case counts.” If new case counts continue to rise, that gives the virus more room to wreak havoc on the economy and individual companies.

Subscribe to Fortune’s Outbreak newsletter for a daily roundup of stories on the coronavirus outbreak and its impact on global business.

Consumer confidence and spending

Another area analysts are eyeing? The all-powerful consumer, who has so far been what’s holding up the U.S. economy. Despite the spread of coronavirus, The Conference Board said its consumer confidence index was up to 130.7 last month from 130.4 in January. However, “If consumer confidence were to really fall off a cliff, drop 10 points and stay down, that would be concerning,” Ma notes.

For Morgan Stanley’s Lisa Shalett, that key consumer metric “needs to hold up to sustain current valuations,” Shalett wrote in a note on Monday.

Fed cuts

Per the market bump on Monday and dip on Tuesday, investors are betting a lot on Fed cuts—and the sell-off on Tuesday could be a sign that investors are “wondering whether [the Fed] did enough, and if it would actually matter,” says Schutte.

Despite the 50 basis points cut on Tuesday (before the Fed’s March meeting), Canaccord Genuity’s Tony Dwyer maintains that recession odds are growing, he said on CNBC’s “Trading Nation” on Tuesday.

And still others worry that the Fed’s power, specifically in reaction to coronavirus fears, won’t be enough to change the tides. “You can’t open a closed factory with a rate cut. I don’t think it’s quite the right medicine for what’s ailing the global economic picture tied to the virus,” Jeffrey Kleintop, chief global investment strategist at Charles Schwab, tells Fortune.

Shalett suggests that even before the coronavirus, stocks and Treasury bond correlations hit four-year highs, noting that stock moves were “increasingly contingent on lower rates for longer”—putting more pressure on the Fed, she wrote.

Volatility index

Others like Northwestern Mutual’s Schutte are taking note of the Cboe Volatility Index, or the VIX—which tracks fear on the Street. Last Friday, the VIX hit 49—its highest level since 2009 in the financial crisis. That’s an obvious sign investors are on edge.

Oppenheimer’s Ari Wald, head of technical analysis, see us in something of a stage-two (of three) in the sell-off. “To keep kind of trading expectations in check, very often there’s these bottoms that play out in three stages—one, you have the high-intensity low which I think was achieved on Friday just given the surge in the VIX and extreme levels and the daily RSI and stocks below their moving average,” Wald said Monday on CNBC’s “Trading Nation.” After a low, he says, markets tend to see an “oversold bounce” (like we’ve seen on Monday and Wednesday in the markets).

Of note: the S&P 500′s relative strength index, or RSI, hit 38 on Tuesday, up from as low as 19 last week. Readings below 30 suggests oversold conditions, suggesting we may have hit that already. But the third stage, Wald suggests, is “signs that selling intensity is abating. You’re looking for a less intense low.”

Whether or not we see a 20% drop in the next few weeks, the larger impacts of the coronavirus on the health of the global economy is front and center in some analysts’ minds.

“Bull markets don’t die of old age. They die of fright,” Sam Stovall, chief investment strategist at CFRA Research said on CNBC on Monday. “What they’re most afraid of is recession, and this is the biggest challenge to the global economic expansion to date.”