Looking Forward to Capitulation

If there’s one thing I can’t stand it’s monotony - the same thing, day in, day out. The thing I’ve always loved about the markets is the uncertainty: the incredible highs, and the devastating lows, the frothy middle. But lately I’ve been grappling with delivering the same old story day after day. I’ve been trying really hard to paste a unique theme to each market analysis, to set it apart from the previous one. But the theme well is running dry, I’m in danger of repeating plots, stereotyping characters.

So this time I’ve decided to change it up a bit. No longer am I going to report another dreary day in the markets. No longer am I going to prognosticate a dim outlook. From now on, at least until the next analysis, the plot is change and hope. I’ll be looking forward to the day of capitulation, the day when either the rally begins, or the fall into the abyss ensues.

Things are starting to come together in a rather obtuse way. The pressure has been slowly building, the charts are aligning. What am I talking about? Well, we’ve been oversold for quite some time now, the oscillators are pinned at the bottom of their respective cycles, the market internals, like the advance-decline line, are in the crapper. No rally lasts more than a single day, sometimes only part of the day. Cats are sleeping with dogs, women and children have been the hardest hit.

Why don’t I think we’re just in for more of the same? Because tomorrow is the start of a whole new series of market antagonizers. Yes, tomorrow we start with more economic reports, and earnings season is upon us. These are the things that got us to this point, and with the market pinned to the floor, it’s hard to imagine that it can go much lower before it bursts to attention.

On the plate this week we have earnings from Alcoa (AA), Pepsi (PEP) and General Electric (GE). Then we have all those cool economic reports, and to top it all off, we have the release of the Apple (AAPL) iPhone 3G into the wild. It will be simultaneously released to 22 countries.

So all this should really get things going. Are we working towards a rally, or are we hanging by a thread over the abyss? That is the question.

Disclosure: I hold a core position with AAPL. Although sometimes it's bigger, sometimes I pare it down based on market conditions.

Comments

[Dan Walker:]

"But the theme well is running dry, I’m in danger of repeating plots, stereotyping characters."

Sounds like you will be a natural at CNBC. Cheer up, odds are it will either turn or crater this week.

2008 Jul 08 07:32 AM

[Philly Jim:]

They really mean CRASH when they say capitulation... We don't need a crash because the economy nor political situation is calling for it. What we need to do is just get used to the fact East Asia is now becoming the better consumer to serve the needs of global capitalists. America is no longer the chosen child and should get used to being second or perhaps third behind Europe. The U.S. consumer has come to represent only 5% of the global consumers; look to the East for all the newest consumer trends this century! You can shop safely in the cities of the East unlike the criminal infested, rotting cities in America.

2008 Jul 08 07:44 AM

[Dan Walker:]

PJ, both the economy AND the political situation DEMAND a crash. That is what it will take to flush out all the bad trades, bad traders, bad management, and sorry politicians who have perpetrated this nonsense on the American people for so long. I don't see it happening here, though. You are more or less on the right track about Asia. If the Fed had not pumped the economy so much the last 10 years, the transition would be so much smoother. Now we will have to feel some real pain while it happens. If you don't like this year, wait until next. The least of your worries will be consumer trends.

2008 Jul 08 09:55 AM

[Toni:]

Doris ?

2008 Jul 08 10:37 AM

[mollytjm:]

there are good buys out there and Apple is among them... we need to stop looking at the short term and try to see beyond the debris of a world financial crisis brought on by irresponsible loan decisions on the part of, it seems, everyone. the world will regroup... the market will adjust and rebound. Good companies grow and make money...for themselves and for their investors, eventually. i admit that i don't have the stomach or inclination for day trading. is there risk in long term holdings of even the best company? of course. if you can't afford the game in the long run, don't play.

2008 Jul 08 11:25 AM