Capitulation Common at Market Bottoms

Jun 16, 2022

 

The S&P 500 Index is down over 22% (peak-to-trough).

Unfortunately, the largest declines in equities have historically occurred as a result of recessions, and odds are high that we are going to be entering one soon. The bear markets of 2020 and 2008 both occurred during recessions and saw declines of 34% and 56%, respectively.

There are a number of technical indicators to analyze when trying to determine a bottom in a long-term market decline. A common one is the VIX, referred to as the fear index.

Typically, the VIX will rise to very elevated levels at market bottoms which is a reflection of investors rushing to sell in mass. This is referred to as capitulation, and we are not there yet.

Below is a chart of the S&P 500 in the upper panel and the VIX (10-day moving average) in the lower panel. Notice how the VIX is currently rising but is nowhere close to the elevated levels seen at the last two bear market bottoms.

 

If you are worried about losing money as a result of this bearish market environment, we may be able to help.

If you send us a copy of your most recent investment statement, we will analyze it and give you our thoughts. This is done at no charge and our analysis is yours to keep regardless of whether you become a client or not.

We use our analysis to manage client risk and it is during these types of market environments that it really pays off. Our client accounts have positive returns year-to-date.

 


If you have any questions, please feel free to send me an email.


Craig Thompson

Craig Thompson, ChFC

https://asas-inc.com/

Email: craig@assetsolutions.info

Phone: 619-709-0066

Asset Solutions Advisory Services, Inc. is a Fee-Only Registered Investment Advisor specializing in helping the needs of retirees, those nearing retirement, and other investors with similar investment goals.

We are an “active” money manager that looks to generate steady long-term returns, while protecting clients from large losses during major market corrections.


Asset Solutions may discuss and display, charts, graphs, formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions. Most data and charts are provided by www.stockcharts.com.

Asset Solutions is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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