Market Capitulation
Updated
What is "Market Capitulation I"?
By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point in time when investors have decided to give up on trying to recapture lost gains as a result of falling stock prices. Suppose a stock you own has dropped by 10%. There are two options that can be taken: you can wait it out and hope the stock begins to appreciate, or you can realize the loss by selling the stock. If the majority of investors decides to wait it out, then stock price will likely remain relatively stable.
The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a bottom in prices and consequently a good time to buy stocks.
Read more: What is market capitulation? | Investopedia investopedia.com/ask/answers/189.asp
So let´s talk about market capitulation on the "up side"
"Market Capitulation" is usually well know for (quick) falling stockmarkets. If ever a stockmarket is going up so fast like we see this right now than "behavioral finance" is the the same. Right now most of investors do not believe in this rally. If you follow the sentiment on IG Markets today you can read this about Retail Investors sentiment
75 % short DJIA
73 % short SPX
75% short DAX
84 % (!) long Gold
If ever we "invert" some sentences of this definition we get some important issues:
- By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point in time when investors have decided to give up on trying to recapture lost gains as a result of ----> rising stock prices
- However, if the majority of investors decides to capitulate and give up (expectations of falling stockprices) on the stock, then there will be a sharp ----> rise in its price. When this occurrence is significant across the entire market, it is known as market capitulation.
- The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a top in prices and consequently a good time to sell stocks.
Read more ---> "up dates"
By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point in time when investors have decided to give up on trying to recapture lost gains as a result of falling stock prices. Suppose a stock you own has dropped by 10%. There are two options that can be taken: you can wait it out and hope the stock begins to appreciate, or you can realize the loss by selling the stock. If the majority of investors decides to wait it out, then stock price will likely remain relatively stable.
The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a bottom in prices and consequently a good time to buy stocks.
Read more: What is market capitulation? | Investopedia investopedia.com/ask/answers/189.asp
So let´s talk about market capitulation on the "up side"
"Market Capitulation" is usually well know for (quick) falling stockmarkets. If ever a stockmarket is going up so fast like we see this right now than "behavioral finance" is the the same. Right now most of investors do not believe in this rally. If you follow the sentiment on IG Markets today you can read this about Retail Investors sentiment
75 % short DJIA
73 % short SPX
75% short DAX
84 % (!) long Gold
If ever we "invert" some sentences of this definition we get some important issues:
- By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point in time when investors have decided to give up on trying to recapture lost gains as a result of ----> rising stock prices
- However, if the majority of investors decides to capitulate and give up (expectations of falling stockprices) on the stock, then there will be a sharp ----> rise in its price. When this occurrence is significant across the entire market, it is known as market capitulation.
- The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a top in prices and consequently a good time to sell stocks.
Read more ---> "up dates"
Note
What is Zero Hedge talking about?Source: uk.finance.yahoo.com/news/italy-bail-monte-dei-paschi-114000725.html
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Italy to bail out Monte dei Paschi in Xmas cheer for savers
Italy on Friday approved a state-funded rescue of the world's oldest bank, Monte dei Paschi (Milan: BMPS.MI - news) di Siena (BMPS), in a bid to shore up the country's beleaguered financial system.
The rescue plan comes as a relief for investors in Italy's third largest bank but is also fraught with political and economic complications for a centre-left government preparing for an election in the next 15 month A cabinet meeting that concluded in the early hours issued a green light for the cash-strapped state to come to the rescue of stricken BMPS.
It will do so by dipping into a debt-financed 20-billion-euro ($21-billion) war chest that was approved by parliament this week, adding to Italy's already massive debt burden and to borrowing costs which have ticked higher as a result of the current crisis.
Around a quarter of the rescue fund is going to be required immediately to inject cash into Tuscan lender BMPS, which confirmed Thursday that it had failed to raise the capital it needed from private investors.
Prime Minister Paolo Gentiloni said the rescue plan would guarantee the savings of some 40,000 small investors -- most of them elderly -- who would otherwise have spent Christmas fretting over investments that are widely seen as having been mis-sold in the first place.
Finance Minister Pier Carlo Padoan told a late night press conference that the deal would get the bank off its sickbed, enable it to resume lending to businesses and ensure "full tranquility for its savers and its employees".
Whether markets regard BMPS as on the road to recovery will not be clear for some time, with the resumption of trading in its shares after the Christmas break set to provide the first test. But Friday's overall mood on the Milan stock exchange was upbeat, with the main index rising by nearly one percent.
- 'Something of a relief' -
The news that it will receive state aid comes as "something of a relief, even if it does involve taxpayer funds and represents a big deja vu, having already been rescued in recent years", said Mike van Dulken, of Accendo Markets.
Note
What was Zerohedge saying days before the referendum? zerohedge.com/news/2016-11-28/italian-bond-risk-spikes-30-month-highs-referendum-fear-batters-banks
zerohedge.com/news/2016-11-27/eight-italian-banks-may-fail-if-renzi-loses-referendum
Note
What is Zerohedge saying now?zerohedge.com/news/2016-12-23/forget-monte-paschi-italy-may-have-far-bigger-problem
Note
What does this mean?On zerohedge.com the BMPS stories in each case are "headline news". 4 weeks ago Zerohedge is telling a story about a complete failure of Italians Banking system followed by a crisis in the overall European Banking system. Everybody understood that this means nothing else than a crash in stockmarkets.
This crash never occurs. The Banca Monte Paschi will survive. The Italian Government is going to pay 5 B Euro to bail out the BMPS and it looks like this might happen now and on tuesday or the following days or weeks ahead this issue is solved out.
What is now Zero Hedge making all of this?
ZH is saying today: Forget about BMPS (!) a volcano (!) is a much higher (!) thread.
If ever you read someting like this than you feel or see that this is a kind of capitulation. If ever this is the beginning of a capitulation in a few days only one by one investors start to think same again: Forget about Monte Paschi. But keep in mind - we are not talking about "one" bank. What we are talking about is the complete meltdown of the Italian and European Banking Sektor widely announce by "everyone" just 3 weeks (!) ago. And this crash will not occur.
Oops.
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FTSE/Mib: 3.000 Points ---> up and still rising:930e888ea91284a71b0e-62c980cafddf9881bf167fdfb702406c.r96.cf1.rackcdn.com/data/tvc_ea013687f5ca4d831a1a0c49eeb8b31e.png
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Check tomorrow how Italy might open trading!930e888ea91284a71b0e-62c980cafddf9881bf167fdfb702406c.r96.cf1.rackcdn.com/data/tvc_b082a748383891119a44921c1d8a43f6.png
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And Germany as well ....
930e888ea91284a71b0e-62c980cafddf9881bf167fdfb702406c.r96.cf1.rackcdn.com/data/tvc_bb9f42683c4f8e99451f9274461db635.png
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