Is this capitulation?

NYSE trader markets stocks
Brendan McDermid | Reuters

Is this capitulation? Do you believe we are in a bear market, or not?

One thing's for sure: for a brief moment in the middle of the day, we were in Twilight Zone territory. Rod Sterling should have been the stocks reporter. Consider the following:

The CBOE Put/Call ratio, the ratio of put contracts to call contracts being purchased, was 1.75 just prior to the open. That means there were 175 put contracts being purchased for every 100 call contracts. That is extremely high and indicative of a panic.

At 12:30 p.m., ET, there were:
1) 1,347 new lows at the NYSE, roughly 40 percent of the NYSE and the highest levels since November 2008.
2) 30 declining stocks for every one advancing stock at the NYSE — again, levels that not seen since 2008.
3) twice normal volume.

All of this is suggestive of at least a short-term selling climax. And that's exactly what happened. Stocks rallied, and rallied hard. The Dow transports rallied almost 300 points from top to bottom (about 5 percent).

Here's the problem: this only suggests that the selling has halted for the moment. In bear markets, you always get rallies. Some of the last for a day; some for a few days. But then the markets drop again.

So, to answer the question, "Is this the bottom?," you have to have a conviction on the markets. If you believe this is just a garden variety sell-off (and so far this is a garden-variety sell-off, since the S&P 500 is roughly 13 percent off its May historic high), then there is a good chance we are near the bottom.

But if you think we are headed for a steeper drop — and many feel we could drop another 10 percent or more — then today's action, and the likely modest bounce we will get tomorrow, is just a brief respite.

Ladies and gentlemen, place your bets.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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