Capitulation Often Signals Big Gains Ahead

And a gift was delivered on Dec. 18, when the Federal Reserve said it would slow its pace of interest rate cuts. Markets fell hard. Nothing was spared.

Using exchanged-traded funds as index proxies, the iShares Core S&P Small-Cap ETF (IJR) fell more than 4%. The iShares Core S&P Mid-Cap ETF (IJH) fell 3.84%. And the SPDR S&P 500 ETF Trust (SPY) dropped 2.95%.

Capitulation Often Signals Big Gains Ahead

Forced selling is part of being in the markets. On Dec. 18, 96.8% of all Big Money signals were sells. Only 11 stocks were bought, while 334 were sold. This is capitulation:

But I’ll soon show you how capitulation often signals big gains ahead.

First though, note how no sector was spared in the selloff:

When I look at that chart, I see all these sells creating opportunities across sectors.

Stocks Of All Sizes Rise

Since 2012, there have been 58 days when 330 or more stocks were sold. But here’s what I mean when I say there are big gains ahead – a year later, stocks of all sizes rise more than 20%, on average:

These huge capitulation deals are sales on stocks.

This makes an interesting setup for 2025. As the chart above shows, average returns at the index level are strong.

Still, some single stocks should outperform greatly. And the best bet is to identify and buy high-quality winners on sale.

Lately there have been some big winners in certain sectors, like financials, discretionary, industrials, and technology.

After Dec. 18’s rare capitulation signal, there will likely be more fast-rising winners in the future too.

Spot the Winners

It helps to have a MAP to spot the winners.

One of the winners in the discretionary sector over the past year is Deckers Outdoor Corporation (DECK). Some of the apparel maker’s popular brands include HOKA and UGG.

As I wrote earlier this month, Big Money has been jumping all over DECK. It’s pretty easy to see why, with such great sales and earnings growth:

Those with a MAP have been on board with DECK for a while. The Big Money buy signals have been popping on the stock, especially those two blue bars above (those mean DECK was a Top 20 buy).

The right research tools can be so valuable – especially after the recent capitulation!

MAPsignals spots what others miss. As 2025 approaches, consider a MAP to guide your investing.

If you’re a serious investor, Registered Investment Advisor (RIA), or a money manager looking for hedge-fund quality research, get started with a MAP PRO subscription today.

Disclosure: the author holds no position in DECK at the time of publication.