Now, fear is washing it all away. Everyone knows the financial reasons for the continuing downward spiral in stock prices. Big, bellwether technology companies that just a year ago were making more money for investors than they ever dreamed possible are turning into nightmares, and there are concerns the economy isn't sick enough to prompt the Federal Reserve to cut interest rates enough to satisfy Wall Street. Co. But deep down, frightened investors are driving the market. Capitulation is the psychological stage that comes after falling stock prices have caused fear and resignation.
Capitulation is the psychological bottom.
Patrick J. English, research director at Fiduciary Management Inc. in Milwaukee, says that while we may be near the bottom, there's no conclusive evidence the carnage is over. It was higher highs and lower lows. This thing has just sucked people in and smashed them all the way down. February marked the first month since August 1998 when stock mutual funds had negative inflows. You've got to flush out the desire for people to want to own these stocks before you make a bottom in them.