Is This Capitulation?

(Points and Figures) -- No, it's not. Capitulation is a gigantic move. This is death by a thousand cuts. Some days worse than others. But, the writing has been on the wall for awhile, to some bears, years.

What do you do if you are long gold or short $SPY? You nailed the move. You'd like to keep riding but what if there is a sudden surge in sentiment the other way. You could watch your profits evaporate.

If you are long gold, sell some near term at the money calls. If the market turns, you can get out of your longs, and still ride the short calls down. If it continues to rally, you just don't make as much.

If you are short $SPY ($ES_F), sell some near term at the money puts. Same as the gold trade. Volatility is up, so you get the advantage of selling into what should be a premium bubble too.

Capitulation will be far worse than this. There are still buyers out there. There are accumulators of stocks they like. People are sniffing around for yields. Depressed stocks that pay big dividends are really attractive. Some preferred shares look good.

We might get capitulation. But I don't think it happens today, or tomorrow. October is the traditional time. When you see leverage come out of all commodities-and all prices drop regardless of supply and demand factors-then you know you are seeing capitulation.