Still no capitulation

This blog started off as an assignment for my Education Technology class I'm taking, and I recently modified it for another class, but now I'm thinking I want to blog for real to get my thoughts together. I'm not sure if anyone besides me is reading this, but if there is, they shouldn't be taking any of what I say as investment advice.

This whole situation was foreseeable long, long ago. That's why there's many books already published and at the bookstore. The "stock market" is still overvalued and has lots more to lose...but not necessarily right now. The VIX and VXO volatility indices are hitting levels usually indicative of a turnaround, but I'm not sure how the recent bans on short-selling, etc., impact. All I know is that my bids on gold/mining stocks are getting hit and then still going lower, despite my thinking they are undervalued. And that's the one sector that really does seem undervalued.

The market is turning around as I write this. That's actually not a good thing for the short run. Without the day-end capitulation as usually occurs during crashes, that means there's still lower to go for the general market. I do believe gold mining stocks are closer to the bottom than other stocks. But the rest of the market is in for a stock, volatile, downhill ride.

The Feds are so stupid. $700B isn't going to impact a credit market where the credit default swap market is almost 100 times that. The entire credit freeze is because lending was too lax. Now the pendulum is swinging and lenders are realizing it's best to cut back. On top of that, $700B (while maybe enough for bad mortgages alone) isn't going to actually hit the economy. The loss is already there and the $700B is just going to allow the banks to realize the loss on their accounting books.

Worldwide, central bank lending rates are falling with the flight to quality. Germany Bundesbank is willing to insure all deposits. There will be a dead cat bounce at some point and money will flow out central bank and treasury securities and back into equities. The next move has to be a cut in rates...at least by Euro and British central banks. That's positive for gold. Maybe that will halt the US$ rally. Most people think dollar is weak, but for the past 4 months or so, it's been insanely strong. That's why gold miners are getting hit hard even though gold bullion is adjusting? That doesn't make theoretical sense but is the timing coincidence? New high after new high in the dollar index. I think maybe the media needs to start touting diversification into gold for it to gain momentum. The only people in gold now after it getting crushed are insiders and the professionals...so at least I have good company. I can't imagine any amateurs or weak-hearted being in gold miners at this point. Miners had excellent support at their lows today. Didn't expect it to go that far though. I'd say between this day and last Friday, there was capitulation in the miners. It felt awful lonely trying to buy. There were very few buyers and that's why stops must have been quickly hit and broken through.

Too bad the market didn't close on it's lows today. It rallied to recapture about half of its max loss of 750 points on the DJIA. Dumb, dumb, dumb. Just like Chinese water torture, it'll be a slow and mentally painful spiral down. I thought there would at least be a rally after the $700B bailout bill was passed.

Jim Cramer threw in the towel today. So that's a good sign. I think I need to check the papers and layman investment sites to see what they'll telling people. If it's how bad the economy is and how things look to get worse, then maybe this was indeed capitulation for the moment. As long as they're telling the public to buy on the dips and that this is a great buying opportunity, then we have further to go. That's just how the market works.