Capitulation? You Won’t Know It When You See It.

Capitulation? You Won’t Know It When You See It.

from WSJ.com: MarketBeat by David Gaffen

Have we capitulated yet? 

As the bear market grinds on, alternating spates of solid rallies with a few days of depressing declines that take the spring out of investors’ step, there remains, as always, the desire for the clarity of capitulation — that moment when the cupboard is bare, and there is nowhere to go but up.

Laszlo Birinyi of Birinyi Associates says investors should divorce themselves from this, no matter which type of capitulation they’re waiting for: the big selling crescendo (similar to the horrid downturns of mid-October), or the petering out of volume as depression sets in and investors sit on their hands.

“In the stock market, capitulation at market bottoms is a sterling example of an issue which is not only wrong, but potentially costly as investors wait for a bus that never arrives,” he writes.

He notes that in August 1982, a number of market technicians were proclaiming that the necessary washout had not occurred, when in fact the market had already bottomed. In 1990, investors and analysts spent most of the fourth quarter searching for a bottom that had happened, and in 2002, the market underwent a subtle shift from bear to bull as investors continued to wait for declines.