how close are we to capitulation?

[NW-Bound]

... My other indicator is when my smarter-than-everyone-else neighbor sells everything. Her last remarkable insight was the third week of February 2009 and she proudly announce she went 100% to cash.

Marko, please update us on your neighbor

I am afraid that was a one-shot indicator. She probably is still in cash.

Marko needs to canvas the neighborhood for other "indicators".

 

[Danmar]

Why speculate about the unknowable

 

[marko]

Marko, please update us on your neighbor!


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Well, she's so utterly brilliant--just ask her-- that she never really got back in, expecting each new day since March 2009 to bring a reversal and then slowly realizing that she missed the boat.

 

[Nemo2]

Why speculate about the unknowable

+1

 

[NW-Bound]

Why speculate about the unknowable

Because if we know, it becomes fact and there's nothing left to speculate.

 

[FIREd_2015]

If history is any indicator the VIX usually spikes first. VIX closed today at 28.14. In August of 2011, VIX was in the 40's and in October of 2008 VIX shot up to the 80's so my guess is we're not there yet.

 

[cyber888]

Yellen's done talking and did not rule out negative interest rates, so it's anybody's guess. Capitulation possibly ended today when Dow went down by -400 points - many sold a lot. Then went up to -234 at close. Dow futures now +63. Oil recovered from $26.50 to $27.68 (now). This is not 2008, but more like 2011.

If I'm wrong about today, then Capitulation ends near summer time when the demand for oil goes up as everyone takes their car on a road trip with cheap gas prices, and all equities goes up as oil prices going up.

 

[audreyh1]

If history is any indicator the VIX usually spikes first. VIX closed today at 28.14. In August of 2011, VIX was in the 40's and in October of 2008 VIX shot up to the 80's so my guess is we're not there yet.

I would expect we have at least 40s. It reached 40s in August of 2015.

 

[papadad111]

Don't think we're anywhere close to capitulation as there are plenty of bulls still around. When all the bulls become bears is when the bottom is in. moo

+1

My target when I turned bearish back in November was SP500 @ 1750 and til we hit 1750 level I think any rally is a fools rally.

 

[HadEnuff]

Is "capitulation" a fancy word for having hit the bottom?

 

[papadad111]

Yes. The proverbial throwing the baby out with the bath water. Sell just to be selling. Fear is felt broadly. A crescendo of selling resulting in a washout and herd selling where only the strong survive..

It's the emotional - behavioral aspect of finance - a very important part of human driven markets - that makes trading an art not just a science.

Capitulation. Nope. Hasn't happened on this down leg yet. Not even close. Another 100 -150 points down and maybe we see it.

We may grind around 1850 as we have since January but another fast and furious leg down will happen later, probably in March...

Remember China has been on vacation all week - when they come back to work we will see VIX spike and the selling ensue

Keep in mind we've not seen a near 20 percent correction for 6 years. We were way overdue. Even overdue for more frequent 10 percent corrections - we saw only once or twice since 2009, this now makes three. ...

Welcome back to how markets usually taste when not spiked with fed's super-punch.

 

[HadEnuff]

I've been managing my own investments since 1980, so I've seen this play before. 2 years ago I was talking to a young man who had graduated from school after the collapse of 2008, so all he knew was the upswing. He was telling me how he was invested and that he had a high tolerance for risk.
I told him that at this point, he didn't know what his tolerance for risk really was. What he had was a high tolerance for double digit returns, and that he wouldn't really know his tolerance for risk until he saw the value of his portfolio diminish by 40%. The last I knew he was into day trading. I am afraid to ask how he's doing now.

 

[eytonxav]

The real question is what is going to turn all the negative news around or where is the black swan to the upside? Saudi's cut production, China performs more financial slight of hands, european banks regain strength, Kim Jung Un gets kidnapped, etc.

 

[HadEnuff]

The real question is what is going to turn all the negative news around or where is the black swan to the upside? Saudi's cut production, China performs more financial slight of hands, european banks regain strength, Kim Jung Un gets kidnapped, etc.

or "the market" decides that there has been enough bloodshed, and given the paucity of any better choices, puts money back into equities.

 

[papadad111]

or "the market" decides that there has been enough bloodshed, and given the paucity of any better choices, puts money back into equities.

Yep... The issue of negative rates is probably the riskiest issue. Even more so than pre-election jitters or the others named above.

The real question is whether or not there is some lurking systemic bank risk that has yet to fully surface ...

Time heals these wounds. Just have to be patient. And hope like hell that we don't have a Japan-like economy for the next 25 years, because firecalc doesn't consider those economic situations in the historic Monte Carlo based simulation dataset

 

[Gone4Good]

The real question is what is going to turn all the negative news around or where is the black swan to the upside? Saudi's cut production, China performs more financial slight of hands, european banks regain strength, Kim Jung Un gets kidnapped, etc.

That's the strange thing about the mood surrounding this correction . . . where's the bad news? I mean like new bad news. And especially, bad bad news. Like really bad. I don't entirely see it.

Yeah, China. Slow growth in Europe. Emerging markets. All the same story that we've been living with for more years than I can count.

Some are trying to spin oil-patch debt as the same thing that subprime was in 2008. Talk about flights of imagination.

But it gets even better (or is it worse, I'm not sure). Deutsche Bank is having some profitability issues and some question whether it will pay optional coupons on a class of debt designed to have optional coupons. Yawn, right?

No, everyone is losing there sh!t about it. How many articles have I read saying it could be the next big contagion because other banks issued contingent convertible debt too? The only teeny, tiny, problem with the story, though, is that there is no channel by which failure to pay CoCos results in a broader financial crisis. It's all pretty silly, actually.

Yes, economies are weak. Some EMs will have or are having a hard landing. But I think mostly this is a reaction to over valued markets colliding with overwrought comparisons to 2008.

When will it end? Once people learn that not everything is 2008. So soon enough I'd wager.

 

[eytonxav]

That's the strange thing about the mood surrounding this correction . . . where's the bad news? I mean like new bad news. And especially, bad bad news. Like really bad. I don't really see it.

Yeah, China. Slow growth in Europe. Emerging markets. All the same story that we've been living with for more years than I can really count.

Diversification, while good, is not a panacea, as all boats will rise and fall with the same tide. Thats the problem we are in, although the US is still in reasonably good shape compared to the others, we are certainly not growing at a strong rate considering the unemployment rate. I am not sure what will happen if oil companies start to go bust, as that will effect bonds/stocks/banks, but its also interesting that the benefit of low oil prices is not very apparent in other sectors although the airlines have faired pretty well.

 

[HadEnuff]

I think it is largely mind-set. We've been hearing how everything is historically over-valued, and when that news has been heard long enough, and loudly enough, you get a piece of seemingly important news like "the Chinese economy is slowing down" followed by a knee jerk reaction of selling, which then convinces others that "this is it! The collapse is here" and it runs away with itself.
Steely nerved, long term investors (who don't know any better) like myself just figure it will turn around just like every time before, and if I maintain my composure, it'll all come back to me.
Or not. But I'm not smart enough to know when the bottom is, so I'll just hang on.

BTW, I do remember in "4 Pillars" Bernstein cautions against reallocating to often, because these trends tend to take a while to run out of gas, so I'm not in a big hurry to reset my AA. IF I miss the bottom it will be as if it never happened.

 

[HadEnuff]

Markets are up today. BUY!!!!!!!EVERYTHING!!!!!!!

 

[dtbach]

That's the strange thing about the mood surrounding this correction . . . where's the bad news? I mean like new bad news. And especially, bad bad news. Like really bad. I don't entirely see it.

Yeah, China. Slow growth in Europe. Emerging markets. All the same story that we've been living with for more years than I can count.

Some are trying to spin oil-patch debt as the same thing that subprime was in 2008. Talk about flights of imagination.

But it gets even better (or is it worse, I'm not sure). Deutsche Bank is having some profitability issues and some question whether it will pay optional coupons on a class of debt designed to have optional coupons. Yawn, right?

No, everyone is losing there sh!t about it. How many articles have I read saying it could be the next big contagion because other banks issued contingent convertible debt too? The only teeny, tiny, problem with the story, though, is that there is no channel by which failure to pay CoCos results in a broader financial crisis. It's all pretty silly, actually.

Yes, economies are weak. Some EMs will have or are having a hard landing. But I think mostly this is a reaction to over valued markets colliding with overwrought comparisons to 2008.

When will it end? Once people learn that not everything is 2008. So soon enough I'd wager.

+1 This is not 2008. And low oil prices are a boon to most European and Asian economies, and ours to a certain extent. Many lower income folks are seeing $50-70/mo savings on gas for their vehicles and this will start being spent in the retail markets. Transportation, agriculture, manufacturing are all helped by low oil prices and those saving will start to drop to the bottom line. And that could be the start of then next bull.

 

[ripper1]

S and P 500 up 30......Dead cat bounce?

 

[petershk]

Yeah I think the broader market is nowhere near capitulation. I need to see way more articles about how the financial system as we know not may not exist tomorrow.

The ONLY place this seems close is in oil where people are just all over the place with predictions. Oil is in a state not seen in over 80 years and no one really knows where the situation is headed. Be happy if you don't live in an non diverse oil country like Russia. The cheap gas doesn't help their economy very much.

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[dtbach]

May not have had THE capitulation, but the last few days have been nice. . . .

 

[38Chevy454]

May not have had THE capitulation, but the last few days have been nice. . . .

X2, nice days to be invested and ride the wave up rather than down.

 

[NW-Bound]

Perhaps investors realize there's nothing to capitulate to. It may be just a correction and nothing more, as we are not in a recession.