Are we in or nearing the capitulation stage of bear market?

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al_bundy said:
on cnbc they are always quoting the VIX
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I've had numerous people throw the VIX at me as the indication of future stock moves. There is absolutely no correlation between the VIX and S&P.

The market has opened up. I wouldn't be surprised to see a massive wave of selling come in later today and crush it again. That might be capitulation. I'll repeat that IMHO market bottoms are not always marked by an identifiable "capitulation." People will go back and point to some big sell off and say that it was there but nobody saw it at the time.
 
al_bundy said:
i think we'll see another big drop sometime next year where the VIX will spike to 40 then a rally, another drop and that will be the end when no one expects it
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OK, thanks. I've got that pencilled in on my calendar......;)
 
2B said:
Please stop saying anything positive. We won't get a real turnaround until 100% of all investors slit their wrists and collapse. :D

.
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This is worse than slitting my wrist . I had a dream I went back to work . I was so tired today I couldn't get up until almost ten !
 
i had a dream that my teeth were coming loose one by one and i had to remove them. it could have been the prime rib and choc cake i had last night...or was it the market conditions insinuating itself into my subconscious?
hang tight...we're all sweating this one out...
 
2B said:
I've had numerous people throw the VIX at me as the indication of future stock moves. There is absolutely no correlation between the VIX and S&P.

The market has opened up. I wouldn't be surprised to see a massive wave of selling come in later today and crush it again. That might be capitulation. I'll repeat that IMHO market bottoms are not always marked by an identifiable "capitulation." People will go back and point to some big sell off and say that it was there but nobody saw it at the time.
Click to expand...

Put a daily chart of the VIX above the chart of the S&P.

Then draw 2 horizontal lines on the VIX at 30 & 17

Then draw vertical line from the VIX to the S&P chart where the VIX hits or exceeds the 30 or 17 line for the latest information.

What do you see?

Also look back and see what a prolong time under 17 or over 30 looks like on the s&P.
 
If I knew how to post a screen shot, I would show you the chart.
 
Shift-printscrn will capture your entire screen. Go into MS Paint and hit "paste". Then use the dotted-box tool in the toolbox near the upper left corner of the screen to cut out what you want, then save the file to a .JPG and attach it to a post. Alt-printscrn will capture just the current active window instead of the whole screen.

In vista, theres a snipping tool in the lower left quickstart area, looks like a pair of scissors on an oval. Click that and it'll bring up a screen where you can outline what you want and then save it.
 
As long as almost every triple-digit rally in the Dow is met with a wave of selling that brings it down to flatline or worse, the bottom hasn't been found.
 
Vix chart
Extremes in the the VIX can be used to find turning points.

Note - the 30 & 17 are not absolute numbers - it depends upon the time period you are looking at. If the VIX was in a range of 5 to 15 for awhile then that range would show turning points in a generally up market.
 

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dex said:
Vix chart
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All your plot tells me is that during severe down turns in the market people are nervous and the VIX rises and during market up moves people are less nervous and the VIX trades at a lower level.

I don't see a cause and effect or even a reliable sell / buy indicator. Like most forms of technical analysis you can use it to clearly explain what happened.
 
2B said:
The market has opened up. I wouldn't be surprised to see a massive wave of selling come in later today and crush it again. That might be capitulation.
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Unfortunately, it appears I was correct about the wave of selling. We're back to being crushed again.
 
2B said:
Unfortunately, it appears I was correct about the wave of selling. We're back to being crushed again.
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In times of extreme fear and greed, this is what happens.

I remember back in 1999, on any day the Nasdaq was taking a drubbing, money rushed in to "buy on the dips." That happens in a market fueled by greed and "irrational exuberance."

Now it's the opposite: almost all strong rallies are met with a huge wave of selling that erases all the gains and then some. That's what happens in a market fueled by fear and panic.

There is no bottom, IMO, until rallies can start consistently holding at least most of their initial gains. As long as rallies regularly fizzle and turn into drops, there is no bottom.
 
Right now fear is stronger than greed. When greed becomes stronger than fear, the market will rally.

What I see is a lot of large institutionals dumping shares. They'll be buying in a few days, but probably not en masse..........
 
2B said:
I don't see a cause and effect or even a reliable sell / buy indicator. Like most forms of technical analysis you can use it to clearly explain what happened.
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1. Spiking - VIX in a range in between 17 and 30 - The VIX is used to show extreme levels of fear (bottom) and complacency (top) in the market.
In this range is where the greatest amount of uncertainty is.

2 .- long period of time - It is used to show the trend
- Below 17 - market generally up (from 2004 to half of 2007)
- Above 30 - market generally down

So once you determine the situation you can then determine the investment climate.
No one said it gives you a definitive buy/sell signal.

So if you were to use it for investing a simple plan would be:
Out or No investment - 17 - 30 - Watch for extremes to give you a market direction watch signal.

Buy - VIX at 16.5 and past points trending down
Sell - VIX 17.5 and past points trending up
No system will give you exact high/low, sell/buy points. But a good it would help you mitigate losses (and of course profit)

PS - the traditional lower number was 20 - I used 17 here since that was on the chart I had & I wanted to show the lower extreme and how to use it. I would suggest the 20 - 30 range is better.
 
dex said:
1. Spiking - VIX in a range in between 17 and 30 - The VIX is used to show extreme levels of fear (bottom) and complacency (top) in the market.
In this range is where the greatest amount of uncertainty is.

2 .- long period of time - It is used to show the trend
- Below 17 generally up
- Above 30 generally down
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So here's the question. Does this current VIX number mean I should sell because it's going lower or should I buy since once the VIX gets above 30 the market has hit bottom?

Also, when does the VIX indicate it's time to buy and sell?

I agree that the VIX shoots up when the market dives and falls when things are looking good. I see it as a reflection of investor fear which is certainly going to increase during down drafts. We're in a good panic at the moment so people are scared.
 
VIX spiked up to 42 about 15 mins ago. I bought a large load of SSO (double the SP500). I sold it about 8 mins later for a 4% profit.

My first successful day trade!!!......and most likely my last attempt at doing it.
 
utrecht said:
VIX spiked up to 42 about 15 mins ago. I bought a large load of SSO (double the SP500). I sold it about 8 mins later for a 4% profit.

My first successful day trade!!!......and most likely my last attempt at doing it.
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Dumb luck. See my post. You "timed" the market brilliantly, got a call from your buddy in London or were just plain lucky.
 
Obviously it was dumb luck to time it that perfectly. However , I have done some research into the VIX. It seems that if you bought the SP500 every time the VIX spiked over 30 and sold it when it went back down below 20, you would have done pretty well.

Sometimes that takes many months and Im not saying its any magic potion to great market outperformance. Just an observation.

I did go on margin to buy SSO the last 3 times the VIX went above 30.

I had a 4% profit over 3 weeks
I had a 6% profit over 3 months
The last trade is yet to be determined since I just bought it on Tue.

I couldnt help but buy more when VIX went over 40 but sold it right away for a profit when the market turned around instantly. This is just a small portion of fun money I use for trading. I dont claim to be any expert trader or anything.
 
2B said:
All your plot tells me is that during severe down turns in the market people are nervous and the VIX rises and during market up moves people are less nervous and the VIX trades at a lower level.

I don't see a cause and effect or even a reliable sell / buy indicator. Like most forms of technical analysis you can use it to clearly explain what happened.
Click to expand...

no one tool or indicator will scream buy or sell

you have to look at them all and make a decision. VIX is good at times like these to guess if we are close to a bottom or top by looking at historical VIX data

Vix hit 43 after 9/11 and 45 in July 2002. in each case it was a bottom for a few months
 
ziggy29 said:
There is talk about curtailing "naked" short positions and reinstituting the uptick rule, but I haven't heard an outright ban on shorting seriously suggested.
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Supposedly, naked shorting has been banned effective today. I can't imagine how or why it ever was allowed. I believe it had always been banned except for certain market makers but it was totally unenforced. The SEC has now raised the offense to be a "fraud." I won't believe it until I see the "perp walk."

The uptick rule had always been bypassed by the big boys. It only impacts the retail customers. Now if they eliminated computer driven sell programs it could be done but I don't see that happening.

I believe there is a valid role for short selling. Naked shorting has created a mighty tool for short sellers to guarantee success. The buyer always has to put up money. A naked short seller just needs to keep selling until the buyers give up.
 
Wow - VIX spiked well above 40 today. I read the last time it got above 40 was 2002.

Oh - I see Al-Bundy already posted.

Audrey
 
I'll concede that the VIX is a great measure of market panic. It follows the old rule of buying when there's blood in the street. What you can't predict with the VIX is that when you buy a 30 you won't know that you could have gotten a better deal at 40.

I'm sure someone could do a multi year calculation of buy the S&P with the VIX at 30 and sell at 17. Then compare that to a buy and hold of the S&P index over the same period.

Heck. Some data might be useful.:D
 
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