The S&P 500 (SPY  ) hit a low of 3,623 in Tuesday's session which was quite meaningful as it undercut the mid-June low of 3,633. Following this undercut, stocks put together an impressive rally and are now 2% above these lows.

On one hand, this is a classic bottoming formation from a technical perspective. On the other hand, the market continues to face a complex set of challenges that imply a not-so-easy or neat resolution to a bear market. Instead, bear markets with these types of fundamentals typically end in capitulation or even deeper drawdowns with months of markets grinding lower.

In order to decide this question, let's take a quick detour to understand how we got here. From mid-June to mid-August, the stock market put together a spectacular, bear market rally that was powerful enough to convince many market participants that a new bull market had begun. In total, the S&P 500 rallied 18% which was enough to recover a little more than half of the total losses of the bear market.

However, this rally ended just at the 200-day moving average with the main catalyst being Federal Reserve Chair Jerome Powell's Jackson Hole speech in which he gave a clear and hawkish message and disappointing bulls who were looking for some acknowledgment that inflation had slowed. In recent weeks, the picture has gotten even more bearish as inflation data has come in hotter than expected, while economic data has missed.

This combination of stubbornly high inflation and a looming recession is quite negative for multiples and earnings. It also caused stocks to plunge nearly 15% from these August highs and give up all of these gains to re-test the June lows.

One method is to compare the current fundamental landscape compared to mid-June. It's quite clear that the economy is in the worst place, especially from a housing and global perspective as many countries are dealing with an outright recession at the same time that inflation is crushing discretionary spending and undermining economic confidence.

At the same time, there is no relief on the rate front. Instead, rates are 1.5% higher, while the Fed's stance has hardened. We also didn't have the acceleration in 'sticky' components of CPI pushing inflation higher than we saw in August and is likely to linger for the remainder of the year. In contrast, we had volatile components of CPI fueling inflation, while 'sticky' components were muted. Thus, it was much easier to see the case that inflation could tumble at a similar rate to its ascent.

Given these developments, traders can consider getting long at current levels with a stop at Tuesday's lows. If this is the bottom, then the low shouldn't be breached. But, investors should remain patient as fundamentals continue to deteriorate.