Capitulation? The Evidence is Decidely Mixed

Monday, July 21, 2008 | 11:15 AM

It looks like we have mixed evidence as to whether last week represented a Capitulatory low. My best guess is that last week will be an intermediate, though not final, low mark.

In the plus column, we have:

-Record levels of Short Interest;
-VIX spiked up over 30 (this has not been a good entry in the past);
-Merrill Lynch survey shows Fund managers running very high cash levels
-1,304 new lows on the NYSE, we saw (a record high).
-The Selling stampede lasted 39 days -- unusually long
-AAII Bullish Index dropped below 25 again
-A short term peak in blog traffic

In the minus column, we have:

-Volume picked up, but didn't match the levels seen in January or March lows;
-Bottom callers are out in full force (that's rarely seen at ultimate lows)

-Merrill survey have showed high cash levels in January, February (and here) and March and June; As often as not, stocks went lower;
-VIX at 30 may be good for a bounce, but  it is far below true panic lows of the past;
-A majority of economists believe the US will avoid a recession (why are they always the last to know?);
-Confidence levels dropped significantly, but not to prior extremes (see chart below).

Not quite down to the lows seen in October 2002 or March 2003, when the Nasdaq was off 78%  . . .


Thanks, Ron!


UPDATE: July 21, 2008 2:15pm

Several people have written in to note that the Barron's chart seems to be understated in past major events -- 1973, 1982, 1987, etc.  I do not know why -- or if the chart has been changed over time -- but I will inquire.

Monday, July 21, 2008 | 11:15 AM | Permalink | Comments (38) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Capitulation? The Evidence is Decidely Mixed:


I'd hardly call record levels of short interest (highly debatable IMO...what exactly is your source on that?) a PLUS for the market. However this is not the first place I've seen that being used as a reason to jump in. Your bias is too apparent now BR...


BR: Biased?

High SI is often a net positive, providing a floor under stocks; Squeeze can lead to rallies.

I am not sure I understand your comments.

Posted by: michael schumacher | Jul 21, 2008 11:30:47 AM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™