August 25, 2015 US Approaches a True Bear Market by JohnAuthers Financial Times
Another measure that has enduring appeal, and that can turn into a self-fulfilling prophecy, is a simple gauge of the market’s momentum, which is one of the strongest forces driving the market. Vinny Catalano of New York’s Blue Marble Research suggests that a “mega-trend reversal” tool can signal whether a true bear market has started. This compares the market’s price with its recent trend (its average over the past 50 days) and its longer trend (its average over the past 200 days). When the 50-day moving average drops below the 200-day (sometimes colourfully called a “death cross”) while the price drops below both, and all are heading downwards, an upward trend has been decisively reversed.
May 4, 2014 Stock Market Capitulation Defined by Simon Constable Wall Street Journal
Sometimes there comes a point in battle where one army just gives up. It's called a capitulation.
The same thing occasionally happens in investing, and it can arrive in the form of panic selling.
"It's when the towel gets thrown in," says Vinny Catalano, chief investment strategist of New York-based Blue Marble Research. There are a lot of times when selling by investment professionals is rooted in pressure from clients wondering why you're losing money or not beating the market, he says. If the pressure is great, then you'll get a lot of stocks being dumped all at once. A great example of a capitulation came in 2008. Over the first eight months of the year the major indexes lost about 11% as problems in the banking system became apparent. By September investors were clearly agitated, and the S&P 500 index plunged from 1,255 on Sept. 19 to under 900 by Oct. 10. That also coincided with historically high trading volume, but elevated volume isn't a necessary aspect, Mr. Catalano says. He points out that a temporary rally in stocks often comes within a few months before the real "bottom" is set. After that plays out, a rally can really get going again, as was the case in 2008-09. The great thing about capitulations is that there is an opportunity to find bargains. "I live for those days," Mr. Catalano says, but "they don't happen often." The recent selloff in biotechnology stocks likely isn't a capitulation, but rather just profit-taking within a bull market, he says. One clue is that people haven't given up on the biotech sector. Mr. Constable is the host of the News Hub show at WSJ Live online. Email him at firstname.lastname@example.org.
President and Global Investment Strategist with Blue Marble Research Advisory Services and author of "Sectors and Styles" (Wiley 2006).
A leading investment strategist and asset manager, Mr. Catalano appears regularly in the media (Bloomberg TV & Radio, foxbusiness.com, BNN TV, CNBC, New Delhi TV, CCTV - America), is frequently quoted in various professional publications (Wall Street Journal, Barrons, Financial Times, Reuters), and is a guest speaker at various major forums. Vinny also produces and conducts timely topical and educational programs with many CFA Societies and other groups, including the highly acclaimed "Market Forecast Series".
Previously, Catalano was a Senior Financial Advisor with Merrill Lynch providing investment advice and counseling to high net worth individuals. During this time, he also provided educational and informational instruction to senior and mid level corporate executives of publicly-traded and privately held companies.
Vinny is a past president of the New York Society of Security Analysts, chair of its "Global Thematic Committee", and a Nonresident Senior Fellow at the Information Technology and Innovation Foundation.