I am amazed at the general tenor of comments about today’s rally — it was very much party like its 1999.

I was on Liz Claman‘s show today from 3 -4 (she’s a delight). It felt like a celebration to me — and all we did was undo yesterday’s losses. It was treated like the second coming by some people.

Put this into context: The action of this Bear has ripped away half of the bull market from 1982 to 2007. Thats 27 years of gains down the tubes.

And today’s action took back a single day of losses.

The chatter makes we wonder if there is simply far too much bullushness for anything more than a modest bounce at this time . . .

Category: Markets, Psychology, Technical Analysis, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

52 Responses to “Capitulation? Hardly”

  1. It’s hard to say. What we are witnessing is the end of an empire and the end of a baby boom. With lightning fast communication can what is rising to replace it(India, China and Brazil) fill the void fast enough to stem the bleeding. That is why someone bought and someone sold today

  2. try2bamused says:

    Couldn’t agree more. I’ve find it maddening to watch the financial media carrying on like little children. Have things gotten so desperate that every uptick is treated like the imminent arrival of Santa Claus?

    I did also notice this same exact sort of carrying on when the SPX was at 1050, 950 and 850. I fully expect to see it every step of the way down.

  3. km4 says:

    Krugman says “I just don’t get it. And my sinking feeling that the administration plan is to rearrange the deck chairs and hope the iceberg melts just keeps getting stronger ”

    I agree with CNBC Sucks who said on a previous thread …Any “recovery” between now and when we truly fix our structural problems is just another reflation of indebted consumption. It is false hope and false basis for any genuine, sustained growth in the value of equities…to let true capitalism reign in this country, we first must re-confiscate some of those Treasuries and cash held by our rich. ”

    Hope I’m wrong but I think Obama economic plan is old wine in new ‘O’ bottles i.e. they are not going deep and fast enough to re-confiscate some of those Treasuries and cash held by our monied elite.

  4. HCF says:

    > And my sinking feeling that the administration plan is to rearrange the deck chairs and hope the iceberg melts just keeps getting stronger

    Hey, so there IS an upside to global warming =) Melt that iceberg mother nature!


  5. HCF says:

    > The chatter makes we wonder if there is simply far too much bullushness for anything more than a modest bounce at this time . . .

    Absolutely agreed, BR… The S&P 500 fell 14.5% in 10 trading days. Now after 1 day of 4.01% gains, we’re ONLY down 11.1% Wheeeeee! How the hell is that a good thing?

    I don’t think we’ve reached a long-term bottom until the MSM is absolutely exhausted about the market action. No cheerleading, no false hope, just TIRED… No giggling schoolgirls, no mustard seed declarations… Only when that happens is there a true secular bottom on which we can build sustainable gains.


  6. yeah, but Obama!

    everythings gonna be awesome now

    and also, Change! and , umm, Hope!

    I kid, but he’s actually just laid out a pretty accurate summary of the atmosphere that led to this (short term focus on quick gains)

    as long as he doesnt show up with a hammer and a sickle, I’ll give him the benefit of the doubt for now

  7. TPC says:

    Agree 100% BR. There was no fear in the prior weeks sell-off. I think it was mostly short covering before Obama. I wrote some more here: http://www.pragcap.com/where-is-the-fear

  8. auden5 says:

    Barry, I respect you a great deal, but I am confused about what you need before becoming moderately bullish. Nationalization will not happen. After today’s comments by the White House and Fed Reserve, we know it will not happen. As you said yourself–we’ve wiped out decades of stock market gains. What would make you start criticizing short sellers? People jumping off ledges a la The Hudsucker Proxy? Maria Bartiromo crying on-air? Cramer canceling his program, but not before telling the world, “Harvard Law sucks, and they can have their diploma back?”

    With all due respect, methinks Mr. FusionIQ protest too much.

    I see most banking stocks going higher, at least in the short term. I hope you will agree.

  9. Andy Tabbo says:

    in re: capitulation

    I’ve been saying this to friends, family and clients for awhile now……


    Those who are familiar with trading and peaking signals will understand this. The mood is definitely bad and everything is GLOOMY…we’re definitely in an environment ripe for counter-trend rallies, but the ultimate bottom will not come until we get that final raft of “really bad news.” I don’t know what it’s going to be….

    I think it’s going to take a major Ch.11 or maybe GE heading to 3 bucks…or maybe McDonald’s puts in a “surprising” quarterly ‘miss.’ Or maybe it’s something that will come from abroad….Russia goes completely bust or there’s some sort of coup d’etat somewhere important.

    As odd as this will sound, Major Bull Markets End on Really Bullish News or Events. Conversely, Major Bear Markets End on Really Bearish News or Events.

    Something else to consider in re:major tops and bottoms. Stock market peaks are generated on HOPE. Commodity peaks are generated on FEAR. This is why stock market ‘bottoms’ look very similar to commodity ‘peaks.’ Hope and Fear look different on charts. (From Prechter Elliott Wave Principle)

    Good Luck All.

  10. Bob the unemployed says:

    We are not going to be out of the deep water until there is 9 (maybe 10) percent unemployment. Talking with my friends in various companies, I am still hearing that companies are either undecided about further layoffs or planning further layoffs. I hear of NO COMPANY that is planning to start hiring anytime soon (i.e., before 4Q).

    I figure we are half-way through this mess.

  11. AndrewBW says:

    Channel surfing this evening I passed Larry Kudlow saying, “Was today just a bounce or was it the start of something really big?”

    What a tool.

  12. Bob_in_MA says:

    Yeah, all these people come out saying there will be a big rally, partly because of the negative sentiment. But if sentiment is negative, why are 80% of commentators predicting a rally? Even Marc Faber is still calling for a rally.

    First they say, “the November lows must be tested and hold.”

    Then when the DJIA falls through they say, “well, it’s the S&P500 that matters..”

    Then when that fell through, “well, it didn’t close below it’s intraday November low…”

    There might be a rally to 800, maybe even 850, but this isn’t going to end above 600, and I bet closer to 500.

  13. Pat G. says:

    “Put this into context:”

    If you started investing into a 401K in 1997 you’re even. Then, calculate how much that investment has eroded over a dozen years through dilution of the dollar. Not a pretty picture.


    BR: Its much worse than that. The money you put into this account in 1997 is breakeven.

    Everything since then — money invested at higher levels — is at a loss . . .

  14. Andy Tabbo says:

    auden5 Says:
    February 16th, 2009 at 8:44 pm
    I am shocked by the pessimism on this board. GE is around 11 dollars a share. Wells Fargo is around 16 dollars a share. Both are blue chip companies that will definitely survive, especially after the recent bailout; yet, they are being priced as if bankruptcy is imminent.


    I “generally” agree with you with you in the long, long run. There is A LOT of pessimism right now. I don’t think GE goes to Zero. I’m not sure about WFC. But, the problem now with bottom picking is “percentages.” As you pointed out a few days ago…GE WAS around 11 dollars an WFC is around 16.

    The problem is GE and WFC both dropped over 20% from those levels in less than a week.

    So, while I admire your gumption to “fade” the cliff-divers, I would suggest you keep your stakes small.

  15. TPC says:

    Andy, two questions for you (among many) :

    Do you honestly believe 25 years worth of excess gets cleaned up in 18 months?

    And, after properly marking down 90 billion in losses at AIG in the last TWO quarters – do you really believe the rest of the banks don’t have billions more to mark down? IMO AIG represents the true barometer because they have nothing to hide after being nationalized. If you think Citi isn’t just as toxic as AIG you’re in for a rude awakening…

  16. Bob_in_MA says:


    A much safer bet, if you want to play GE or WFC, would be to buy some far out of the money JAN 2011 leap calls. Personally, I think you’re about a year early, but better to make a smaller bet with a higher payoff if you think it’s all up from here.

  17. Steve Barry says:

    Can’t have capitulation on no volume…QQQQ volume has failed to get above its 100 day MA for 61 of the last 62 trading days…that is astonishing. It is as low volume, methodical re-pricing of the market.

  18. Marcus Aurelius says:

    auden5 Says:

    I am shocked by the pessimism on this board. GE is around 11 dollars a share. Wells Fargo is around 16 dollars a share. Both are blue chip companies that will definitely survive, especially after the recent bailout; yet, they are being priced as if bankruptcy is imminent.

    In spite of the bailout – actually BECAUSE of the bailout – these companies aren’t worth their current valuations. Pessimism? Sure. I’m pessimistic whenever the irresponsible and crooked are saved by the American people.

    As for the insane reaction to Bernanke’s statement that we’ll be out of the recession by year’s end – that’s the latest large load of crap he’s fed the markets since “it’s contained”. I wholeheartedly encourage anyone who believe him to put everything you have into what you think will be the best performing stocks over the next year.

  19. Marcus Aurelius says:

    For an anti-American, muslim, foreign, socialist/communist, heretic (snark), Obama sure is a patriot and one hellatious speecifier (h/t to George Bush) and President.

  20. SWMOD52 says:

    Do ya think maybe Pelosi has got a thing for Obama….I’m pretty sure I she was smoking a cigarette after the speech.

  21. deanscamaro says:

    The comments are meaningless. Commentators need to say something to get reader’s attention or nobody pays any attention to them (look at Cramer and his antics). The only thing of any significance during the day was the stock market making back what it lost before, everything has been said about the crisis (at least 10 times each) and it makes them feel important if they can use that event to call a bottom, a top, or whatever and hopefully call something right (for once in their life). We would be a lot better off if we could find a way to lay off most market commentators, the way a lot of workers in the U.S. have been. What a bunch of repetitive crap.

  22. Andy Tabbo says:

    @TPC “Do you honestly believe 25 years worth of excess gets cleaned up in 18 months?”


    I don’t believe we’re wiping out the excesses in 19 months. If you look at the Nasdaq or OEX (top 100 SP500 stocks), we’ve been mopping up the excesses for 9 years now. I believe all the markets actually peaked in 2000.

    There’s an old saw in trading….”markets go up the stairs and down an elevator.” There’s a lot of truth in that statement. Markets built on hope tend to evaporate violently and quickly.

    So, the economics of the problem may take many years to reconcile, but the stock market may actually bottom much sooner.

    I’m definitely NOT calling some sort of ultimate bottom any time soon. I remain convinced we see 600 sp500 this year.

  23. gregh says:

    additionally, russell napier’s study of bears showed that bear bottoms were marked by a phase of ignoring bad news. So possibly the reaction to the bad news historically has been more key than the presence of a ‘raft of really bad news’. In those cases it seems that when people have ‘given up’ they’ve already sold all they are going to sell and any bad news can no longer do any more damage than has already done.

  24. Sus Anoo says:

    I don’t know Marcus Aurelius it wouldn’t surprise me if the recession (the economy shrinking) does stop by year end. Two years of recession would be well outside the average length of prior recessions (13 months).

    The problem in my view is that once the actual shrinkage is done there will be at least a couple of years of slow consolidating and deleveraging with little to no economic growth. And that’s a couple of years if government policy is almost perfect. If the government continues making Japan style mistakes that process could easily last a decade.

    Since I find it hard to imagine any human activity being conducted perfectly (government or business) I can easily imagine the stock market slowly falling for the next few years as folks give up on being able to buy the profits from future years.

  25. gregh says:

    Correction, I had sex with Katie (reference to Chappelle’s Mad Real World episode)

    Seriously, Correction, I lied about Napier’s findings on bad news – his findings were that large amounts of good news is ignored….huge diff. oops

  26. Andy Tabbo says:


    Agree completely.

    Rallies on positive news = Not to be believed
    Rallies on negative news = Whoa?! Maybe we’re are at a bottom….

    When I can observe the latter, then I’ll be more constructive…..

  27. Ventura2012 says:

    Anyone else think the rally today was soley the PPT, I hate to sound like a conspiracy guy, but I sat and watched the Level II’s on Goldman all day and every time it wanted to pull back small orders would come in above the ask. Definitely am lookin to add to the Goldman short if they run it up anymore.

  28. jacobsk says:

    Bear Market descends “the slope of hope”

  29. Andy Tabbo says:


    I actually agree with your 10.46 more.

    In terms of your 11.01 note…

    I would suggest that markets are powered my mass psychology. For instance, if you keep shocking some human test subject every 60 minutes for days in a row…eventually that test subject will lose all hope and expect to be shocked some more. The shock therapy may actually cease, but the test subject is still damaged goods and is expecting more shocks. The test subject won’t recover until he actually leaves the laboratory for many days…gets home…has a few drinks…a good meal…and a booty call. Then he’ll be real bullish….

    i.e. in horrible bear markets there will be signs of good news, but the market will indeed ignore the news. The negative emotional wave must play out and dissipate.

  30. Ventura2012 says:

    By the way I guess Japan does not have a PPT, they are following up a 4% day on the S&P with a whopping 66 pt gain.

  31. mark mchugh says:

    @ Pat G

    Don’t forget, you still owe taxes on it, too!

  32. Bob the unemployed says:

    > deanscamaro Says: The comments are meaningless.

    Then, why are you commenting?

  33. philipat says:

    Liz Claman. Intersting features. Hope you managed to stay focused on the task at hand.

  34. hawleyl says:

    Here in LA we used to have a financial station KWHY (before FNN before CNBC). One of the programs “Charting the Market” would many times say “and the next technical expectation is a test of the break(out/down)”. So I would not get too excited until the DJIA broke above 8000. In the meantime I feel the falling knife is descending too fast to safely catch.

  35. Boomer says:

    Can’t November have been the capitulation and this just the aftermath?

    Couldn’t this have just been a confirmation of the November low and it held?

  36. debtkid says:

    Weren’t we down 6 days in a row? At a certain point, there has to be an up day. It’s no turnaround. Just people so glad to see one day of green. The red numbers will be back soon enough.

  37. Mike in Nola says:

    Do we need a capitulation for a bear market rally?

    No serious thinker really believes we are at the bottom, but why does that rule out a rally? It’s all in the mind of the investing public and long-only fund managers who are pressured to show gains. After all, the market was making new highs when the housing market was going down the tubes.

    Marc Faber’s reasoning about a possible short term rally makes some sense. The news won’t be a lot worse and at some point the average investor gets a little numb. All the money being thrown around by the governments has to have some impact, albeit temporary. The only worse headline news news which is still to come is the resolution of the insolvent banks banks and that is being kicked down the road aways. That will probably help put in the final bottom whenever it comes, but it doesn’t seem to be here yet.

  38. BG says:

    Didn’t You All listen to Bernanke’s testimony yesterday? He said IF we do this and IF we do that….that the economy will start recovering in the 2ND HALF OF 2009! …..’09!! This Year!!……..This Year!

    I could not believe my ears! My mouth dropped open when I heard the words come out of his mouth. Do you think anybody actually believes such an optimistic assessment with the current state of affairs (not only in the US but around the world) ? We currently have entire Countries in eastern Europe that are on the brink of collapse and he makes such a silly prediction? Now, there’s a sure fire way of increasing your credibility.

    That whole thing was nothing, but a love fest with everybody stoking everybody’s neck…the biggest circle jerk we have witnessed lately; but, for him to make such irresponsible comments about the economy is just beyond reproach. His happy talk made me wonder when he is planning on leaving the Obama Administration, knowing full well, nothing he is saying has a snowball’s chance of coming true.

    That is the kind of talk that gets you an even bigger 3rd Qtr stock market sell-off when the recovery doesn’t come. Hell, the recovery apparently is supposed to start in 4 months. That is the craziest thing I have ever heard considering the circumstances we find ourselves in.

  39. 11/9.09= ~1.21

    ya gotta believe that when the “Longs” begin they’re “Bull case” w/ ~21 % overstatements that ‘capitulation’ just might not be what’s extant..

    yes, re: GE ex.

    as an aside, Liz Claman strikes me as one of the most intelligent ‘news anchors’ to currently grace the satellite feeds. that Katie Couric gets a ‘Nightly News’ gig, as opposed to her, should yell us much about the MSM’s real interest in credibility.


    w/ Au now at ~950, in two short days, I wonder if any previous detractors will have the good grace to issue a simple apology..even in the e-mini Au contract, your insight was tremendously valuable, as it has been, more often than any other elliot-based forecaster I’ve ever seen..

  40. Bob_in_MA says:

    Re Napier, I think what he shows as that the news at the bottom is neither very good, nor very bad. Profits were generally still falling at the bottom, but inventories and prices have started to recover…

    One big point he makes is that the bottom is not marked by any sort of dramatic event, it will almost certainly not look like the short-term bottoms last fall. Capitulation will be a gradual process.

    I think that’s the phase were in now. The question is, how long will it last? I’d been planing on the SPX drifting down to the 500-600 range in the first half of 2010, or that summer (all four of the bottoms he identifies were in Summer, not that that means anything.)

    But now I wonder if the market recovery could take a while. One thing that made the market attractive at previous lows was very high dividend yields. But this time, for every 10% fall in share price, there has been about a 5% cut in dividends. The yield has simply gone from minuscule to paltry.

  41. BG says:

    While exercising early this morning and watching Squawk Box, a new use of an existing word came to mind. It seems quite appropriate for the times.

    The word: fluffer

    Meaning: One who fluffs an object, point of view or idea which has lost its effectiveness or credibility.

    Definition: Manual stimulation or excitement applied to an object of interest usually by oral means. After fluffing has been completed by the advocate of the topic (or supporter of the given point of view), the strengthened/invigorated topic of interest is then reinserted into the larger group discussion to be lightly challenged and for the most part endorsed.

    The above use of the word – “fluffer” helps me to measure the importance of what some of these people say on this network. I think the analogy is quite deserving especially for the one who sits on the far right (both physically on the set & politically) of the program previously mentioned. …A Fluffer. It fits. It definitely fits.

  42. Andy Tabbo says:

    Thanks Hoffer. That tiff was much ado about nothing. With gold hitting 85% bullish on the market vane, Pete Najarian foaming at the mouth, Large Speculators massive skewed long on the Commitments of Traders, one didn’t need to know anything about technicals to understand that it was due for a breather.

    Given the strong move in Au from 700 to 1000 there are plenty of levels of support ahead…I’ll need more price action to get a better view of things now….

  43. Greg0658 says:

    Capitulation .. Retreat ..Defeat
    Wash .. Rinse .. Repeat

    I feel like my/our religion has been used against us. Forgive one another. Turn the other cheek. Live by the sword, die by the sword.

    Man vs man .. family vs family .. community vs community .. corporation vs corporation .. country vs country .. industry vs industry .. super corporation vs all

    MarkH .. a tribe begins @ 2 families in partnership … tribes grow in strength with the more able bodies in its partnership … (advance that to the web dictionary .. please .. the magic word)

    imo .. All these goings on is paybacks of Business/Capism. Blue collar wanted the good life. White collar jobs depend on stifling that. Corporate whites benefit from growing the sales base as well as stifling the blue. Along comes globalization via oil & machine.
    … spins outta control (from a country pov)

    classic history

    Now it seems the advice for me from my favored leader is … suck it up, hang in there .. go back to school, get an enhanced brain .. its up to you to help your country survive

    what else can the Puppet do or say?
    “Stifle it Edith”

    carryover from the past president .. make babies .. go shopping .. get your adversaries before they get you (sounds like a Conan quote)

    both ideologies work in the end .. because everything always works itself out ..
    … from a big picture pov
    classic Capism … classic nature

    do I sound like capitulation?

    ps – since I believe in my religion .. um .. stop end trans

  44. BG says:

    It appears the Kumbaya Fest from yesterday is now over. Please return to normal programming……

  45. Bob_in_MA says:

    Yeah, great rally. If you blinked, you missed it.

  46. mayorofmayberry says:

    BR: Its much worse than that. The money you put into this account in 1997 is breakeven.

    Everything since then — money invested at higher levels — is at a loss . . .

    I’ll say. By my calculation, if you had put $100 a month in the Vanguard S&P fund at the beginning of every month since January 1995 , your $17,000 invested would be worth approx. $15,400 after yesterday’s magnificent runup. Lots of profit-taking today I see.

  47. d4winds says:

    Dead cat bounce + Bernanke said that if do everything perfectly and all goes exactly right, we’re out of the woods next year

    = one day rally

  48. BG says:

    Give us a bottle of whatever Bernanke is drinking.

  49. Porsche87 says:

    I think Bernanke is right, the economy will start to recover in the second half of the year. With every central bank and government throwing everything they have at economic stimulus, it has to move back up. I think they will also figure out a way to get credit to unqualified buyers yet again. Then, in 2010 or 2011, the second shoe will drop as it becomes obvious that the stimulus simply propped up an unsustainable economic model and no credit worthy buyers exist to keep the ball rolling. That is when the world economy will really collapse.

    Short term – cars, big screen TVs and alcohol. Long term – guns, gold and food.

  50. Greg0658 says:

    on definitions:
    when CNBC says gasoline is going bullish .. does that mean the price is rising for the comodity?
    isn’t that bearish for the consumer and America?
    who are they rooting for … maybe I need to lobby Comcast for ConsumerNBC in my channel lineup

  51. Ben says:

    I think that the people posting here have some misconceptions. I’m not saying this is the bottom. But if you go back in history, the following IS present at the bottom:
    There are bullish people calling the bottom.
    There is some good news. It is certainly not all good news, but there are some modest signs like auto sales no longer declining and commoditiy prices stabilizing. There are low inventory levels in general.
    Valuations are low and at secular bear market lows the Q-ratio is usually around 0.3 (this measures replacement value of the assets of the businesses traded in the market).
    There is a very good book called Anatomy of a Bear Market Bottom that I reccomend that goes through this. If anyone knows what the Q-ratio is now btw, I’d love to look at that, not sure how its calculated.