Market Capitulation? Or not yet..

Unless you've been living under a rock, you will have heard about all the doom and gloom surrounding the markets and world economy. It has been building for some time. Over the course of January the markets retreated a significant amount. Early February trading has felt even more volatile. The last few days have seen various markets around the world enter bear territory. 

Today feels different. The stocks I own (many of them being small cap and thinly traded) felt the heat today. Today felt like a "oh screw it, I give up" day. A few of my stocks that haven't felt the recent decline didn't escape today. MBE has felt the recent heat, but today it dropped another 10% on the back of stellar (record) results. I can't help but thinking we are nearing capitulation territory.

The market plays off against two things: fundamentals and sentiment. Sentiment following this well known cycle:

It's hard to pick where we are on the curve, but I think we are somewhere around panic or capitulation. Pessimism may have described January, and the beginning of February looks like panic to me. Could the last few days on the ASX mark capitulation? Time will tell. I think there may be another few ugly days yet, but we are well into the downward spiral with some markets down 20%.

Now on the face of it this makes 2016 look pretty grim, which doesn't bode well for my challenge. However, I have bought companies that were already well sold off so their downside is not from the maximum, but from 30% off the peak already. This means my downside should be limited to a certain extent. It will also offer some very nice bargains that will fuel gains in the future. Don't get me wrong thoug, the short term could be ugly.