Hang around markets long enough and you will learn to associate key words and phrases with market structures. If, for example, you hear someone blathering about the gold-silver ratio, you know we are in a bull market for precious metals. The opposite holds true for terms such as "earnings visibility" and "capitulation." Both come out of the woodwork only when we are in a major bear market for stocks.

Associated with market capitulations are those who use the Chicago Board of Options Exchange Volatility Index (VIX) to define when we, much like the wino awakening in the gutter on a Sunday morning, have hit rock bottom. The general premise is quite valid: As most investors are net long stocks and buy put options for insurance, they tend to bid the price of put options higher as the market declines. At some point, put option volatility surges to the point where the price of put option insurance incorporates a worst-case loss and option buyers cease and desist. In addition, nervous shareholders who hold these put options now have less incentive to sell their stocks. Both factors contribute to a dissipation of selling pressure.

The key phrase is "at some point."