According to Investopedia, capitulation occurs “when investors give up any previous gains in stock price by selling 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.”
Going further, it says “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 margin 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.”
We certainly witnessed investors getting out of the market today with extremely high volume and sharp declines, but was it panic selling? I don’t know if we are there yet, but we are in the neighborhood!
According to Warren Buffett, “be greedy when others are fearful, but be fearful when others are greedy.”
Just remember: You make money when the market is up, but you earn it when the market is down . . . if you have the courage to buy . . . when everyone else is fearful . . . including yourself!