Posted on 10/13/2014 3:22:48 AM PDT by John W
Volatility has returned to the market. To be specific, the market has rallied, sold off, rallied, and sold off, all in one week. This is ideal for day traders but unnerving for individual investors. It is also a big red warning sign.
To refresh your memory, last week every rally failed, so the market ended the week on its lows. Even the October 8th rally of 274 points reversed direction the next day. It was a monster rally based on the FOMC minutes, which revealed member’s concern for global growth. Got that? The market rallied on bad news. In the mixed-up world of Wall Street, that meant interest rates would remain low. Unfortunately for the bulls, the next day the market fell by 334 points. That’s volatility!
In nontechnical terms, the October 8th manic rally was a head fake. It might have cheered amateur investors, but in reality, this has become one of the most dangerous markets since 2008.
Facts are hard to dispute but easy to spin. Already, the Russell 2000 RUT, -1.37% is in a 10% correction. Judging by history, the Dow Jones Industrial Average DJIA, -0.69% and S&P 500 SPX, -1.15% shouldn’t be far behind. A major correction or crash would be definitive proof this market is wearing no clothes.
(Excerpt) Read more at marketwatch.com ...
Looking at my IRA now. Thinking about putting it all into a cash fund. Like I did in 2008 and lost nothing in the crash.
I wrote the other day that the 30-plus point swings in the S&P four days in a row indicated a system getting out of control, then it dropped another 25 S&P points from that point.
Now it’s picked up 20 this morning from the low; that’s far more movement than we usually see in a day and the NY open is still 2 1/2 hours away.
“They” (Federal Reserve, TBTF banks, HFT robots) need to make it a four-sigma day and bring the S&P up another 20 points (on top of the 20 already) or the margin calls still coming in from the first big drop on Tuesday will mean another couple of days of big selling.
Yes, there is actually a serious danger you may be able to buy good companies at reasonable prices. Who knows what may happen next?
October, on the other hand, is usually a pretty good month but it also lays claim to the two worst one-month performances in the S&P500 since 1950 (-22% in 1987 and -17% in 2008).
Look around. Are any of these companies we see every day worth more than twice what they were 6 years ago? No.
When measured in U.S. dollars (with its declining purchasing power), maybe they are.
A better question would be, are they making more or less money than they were six years ago, three years ago, six months ago, etc.? Or are their long-term prospects any better or worse than they were over those time periods?
The answer to your questions is what makes a free market.
Maybe. The bigger issue is whether these companies are profitable on their own, or if they are only profitable because they operate in an environment marked by “crony capitalism” and business activity under government mandate.
I thought everyone knew getting into the stock market was bad in September/October. :-)
Markets trend one way or the other all the time. You will have to go back years to find four days in a row, today will be five, with a swing of 30 points or more in the S&P. That’s the problem this week.
I wanted to add to my previous post that 1905 is the 200-day moving average for the S&P. “They” have parked it at the convenient very round 1900 for the last hour, and will probably keep it there until just before the open. Today’s plan is to nudge it just above 1905 by the NYSE open to catch the attention of the HFT trading robots who would “see” that it’s just above that magic 200DMA and trade it with a bias toward buying all day long.
I remember this kind of happy talk all the way down in 2008.
The stock market is the Vegas strip without the free drinks.
I don’t think anyone really knows why it does what it does but I do believe there are some who know how to manipulate it.
We pulled all our money out of the market years ago. It is possible we could have made a lot more money leaving it in the market but it is also possible we could have lost it all as well.
I know some have the time and interest to find good companies to invest in but I have other things to do with my life.
Hope all you fellow freepers that remain in the market do well.
This is in no way an effort to make excuses for Big Government, or Crony Capitalism, or any other such thing. I’m as much a Free Enterprise type as much as any other FReeper. And I will continue to do all within my power on a local, state, and federal level to reduce the size and scope of government. For example, tomorrow night I will spend four hours at a county commission meeting covering what happens and reporting on it.
But we still have to deal with money, markets and life in general as it comes. Investors have to learn to deal with what’s out there, instead of sitting on cash and whining about .5% interest rates. And conservatives cannot sulk in a cave and refuse to participate.
When you sit on your hands, they’ve won.
I’d be more interested in percentages than points. A 30-point swing in the S&P means a lot less at 1905 than it did at 500. In 2014, a 30-point swing is less than a 1.6% gain or loss. A 30-point swing twenty years ago, when the S&P stood at around 455, would have been more than a 6.5% gain or loss.
If you had bought in 2008, or 2009, or 2010, you would not be complaining now.
I got Altria at 15, GE at 18, AT&T at 24, Royal Dutch at 46. What’s not to like?
Fine. Find me four 1.6% swings in a row instead of wasting my time with sophistry. Hint: don’t start after 2012.
When you look at it this way, it's easy to understand how fascist government can not only survive ... but they thrive with a lot of public support.
Welcome to the 1930s!
OK. But that’s only two years. We’re hardly in uncharted territory here.
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