Capitulation is Near?

The market has been very bad the past several months. It is hard to know when there is a bottom and it can begin going back up. But one thing is for sure, before it can, most people have to become truly discouraged. The AAII tracks investor sentiment. Sentiment is normally very bullish, since investors must normally be positive about the market (or they wouldn't invest). But right now, the sentiment is bearish, with many more investors skeptical about the market than positive. This is a good sign and points to a bottom.

In the latest poll, Bullish sentiment was 34.3% (long-term average is 39.2%). Neutral sentiment was 20.4% (31.7%) and Bearish sentiment rose to 45.3% (29.0%). Bearish sentiment exceeds bullish by more than 10 percent.

If we get a big one day capitulation in the market, shown by a spike in the VIX index, we will know we are very close to a bottom.