Monday, July 14, 2008

Reply to To Tom

Tom asked an interesting question in a comment a little while ago and I thought I'd post his question and my reply.

First his question:


 tom said...

This is not a slam on your prediction but a legitimate question. The market was equally as oversold right before it crased in 1987. Equities seemed a compelling buy on Oct. 16th and as you know they became even a better buy on the 19th. 

It doesn't seem like we have seen the capitualtion we need to form a bottom. 

Crash or rally from here and why?


Here is my reply:


Blogger carl futia said...

Well, I just googled the three words: capitulation stock market. I got 155,000 hits. The first 10 pages were almost exclusively recent ones.

This is at least a little bit of evidence that an awful lot of people are looking for "capitulation" before being buyers. Frankly, I don't believe the market can accommodate so many eager buyers, so I doubt it will give them the chance they are looking for.

Along the same lines I might also observe that "capitulation" is generally arises from fear that is induced by falling prices, not by news events in the economy. But prices are low now because there has been a ton of bad news over the past 6 months. What surprises me is that the averages are not much lower than they in fact are today. Who is buying?

7/14/2008 01:49:00 PM


2 comments:

jon said...

Carl,

how much lower would you want to see the markets go? we are in a Bear market and all the financial sector is down like 90%, so where would you want to go from here? i think the reason we are not down further is because we are not technically in a recession!

just my thoughts

JOSE said...

Carl,

conspiracy theory of course...the PPT(PLUNGE PROTECTION TEAM) is doing the buying.