Holy Carp...

During this time of fear and panic I would like to offer readers the below points of information that I find particularly relevant:

According to investopedia.com, capitulation is described as “giving up any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling. After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom”.

http://www.reuters.com/article/hotStocksNews/idUSN1737041320080917

Today gold had a massive movement to the upside, possibly revisiting the days when the commodity was viewed as a safe haven to investors in times of currency or inflation concerns. To quote Reuters, “The $81 rise in the benchmark U.S. gold contract for December delivery was gold's biggest one-day rise in absolute terms since 1980 and the biggest one-day percentage gain for gold futures since February 2000”. This would seem to indicate that confidence in the US banking system has been severely shaken.

For a brief moment today, the improbable occurred in the bond pits: the 3-month U.S. Treasury bill yield traded in negative territory. Take a moment to digest this information; for a short time traders paid for the privilege to loan the U.S. government money, a concept that under rational thought is completely perverse. If your friend asked you to borrow money in return for an IOU, would you say “sure, and because I take such pleasure in making this loan I will pay you in the transaction”? This shows that investors, who are usually out to make a profit, were satisfied with simply preserving capital.

http://www.reuters.com/article/bondsNews/idUSNYG00128420080917

Massive selling has been seen across the board over the last few trading sessions. Companies with no exposure to the banking sector have been punished relentlessly as the market tries to digest an unreasonable blanket of bad news. The S&P 500 sold off on heavy volume at the end of the day and now sits well into bear market territory. Panic is surely being felt among retail investors as described by CNBC’s market reporter Bob Pisani: “On Monday, for example, mutual fund investors panicked and pulled $10.9 billion out of the market (TrimTabs), with particularly large outflows ($4 b) from global funds. So far, there's $13 billion in outflows in the first ten trading days of September. If we stay at this level, it will be shy of the $35.8 b outflow we saw in January and well short of the record $49 b outflow in July 2002, but it will still be a big month for outflows. July 2002? Remember the stock market bottomed in October 2002! That's the rule: retail investors tend to panic near market bottoms. So the big outflows this year were in January, July…and September”. When retail investors pull out in herds, the big money players sense the bargain and bring in capital from the sidelines to drive the market higher.

A market bottom can only be seen through the rear view mirror; the next few trading sessions will provide an excellent guide for the future direction of prices. If the market recovers tomorrow or Friday with a sustained rally on higher volume going into the close, I believe a bottom will have been marked at this level. With concerns over government involvement we may oscillate around this mark, however, I do not expect a large or prolonged decline below where the S&P 500 closed today.

http://www.cnbc.com/id/26758934