Market commentators this afternoon seemed downright masochistic, as many of them complained that we needed to be down even more after falling close to 800 points today. Then, as the market rallied back in the last hour of the day, those interviewed on CNBC were complaining that it didn't mean capitulation was taking place. But who ever said that capitulation couldn't happen in the middle of the day? And since when was an 800 point drop and a VIX spike close to 60 not considered panic selling?
As shown in the chart below, while it still closed down significantly, the Dow rallied back nicely in the last hour of the day. Investors usually like to see the market sell off in the morning and rally into the close, as the "smart money" trades at the end of the day. It's hard to imagine being happy with a 300+ point decline, but looking at how bad it could have been, we'll take down 350 over down 800 any day.
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"But who ever said that capitulation couldn't happen in the middle of the day?"
DEAD. ON. RIGHT!
Posted by: Don | October 06, 2008 at 05:25 PM
...or maybe it was just short covering at the end of a session...
Posted by: Celal | October 06, 2008 at 06:45 PM
How about an 850 point decline over two days...lol
Posted by: mpr | October 07, 2008 at 08:02 PM
"But who ever said that capitulation couldn't happen in the middle of the day?" I guess you have your answer now. LOL
Actually, Art Cashin's scenario was misunderstood. He wasn't saying the mkt couldn't bottom mid-day; his scenario called for a 1 1/2 day rally-less decline. That's why he wanted to see it close on the lows on Monday; so it would bottom mid-day on day TWO.
Posted by: dave | October 08, 2008 at 01:59 AM