What a wild ride this week in the stock market. I’ve always loved roller coaster rides at the amusement park – though being retired now – I no longer go to amusement parks.
However, I still don’t mind the roller coaster ride of the market every now and again. Look at the graphic below which shows each day minute by minute for the past week.
- On Monday the DJIA opened at 25,538 and closed at 25,317 — Down about 221 points.
- On Tuesday the DJIA opened at 25,038 and closed at 25,191 — Up about 153 points.
- On Wednesday the DJIA opened at 25,173 and closed at 24,583 — Down about 590 points.
- On Thursday the DJIA opened at 24,736 and closed at 24,984 — up about 248 points.
- Today the DJIA opened at 24,770 and by 10:57 AM was down to 24,456 or about 314 points. Then it soared to 24,913 by 1:05 PM just to drop back to 24,549 by 3:13 PM and ultimately closed at 24,688 — Down 82 points from the open.
Now when you hear the news you will hear that the DJIA was down 296 points today. Why the difference? The REAL ups and downs are measured from the previous day close and not the current day open. If you subtract today’s close from yesterday’s close you will see the 296 points (e.g. 24,984 – 24,688 = 296). This is supposed to be the way to look at the market … but many day traders look at the open as compared to the close vs. the previous close as compared to the current close.
The question is … if you are in the market … are you scared yet? You should not be scared.
Or, if your not in the market … are you getting prepared to go into it? You should be getting ready.
Almost this identical market “hick-up” (for lack of a better term) happened back in January of this year. Here’s the chart and facts surrounding this:
- In the 13 days between January 26 and February 8 the DJIA fell 2,756 points or about 10.36%.
- Then looking out further from January 26 to March 23 – a period of 56 days – the market continued a downward trend after a short up trend for a total point drop of 3,083 or 11.58%.
- THE WORLD DID NOT END AND WE DID NOT GO INTO A BEAR MARKET THAT TIME.
- From March 23 through October 3 the DJIA gained 3,296 points or about 14% in only 6-1/2 months.
- Now, since October 3 the DJIA, through today, has lost only 2,141 points or about 7.98%.
- WE ARE STILL QUITE A WAY FROM A BEAR MARKET WHICH IS DEFINED AS A PROLONGED DROP OF 20% OR MORE FROM THE MOST RECENT HIGH.
Does this mean that we will not go into a Bear Market at some point in the future? No, it simply means we are not in it yet. I really don’t see it happening between now and year-end. The fourth quarter, historically, is a good quarter for the market even though the month of October, historically, can be a volatile month.
So, hang in there and let’s see what shakes out in the next few weeks. Don’t worry, if we do go into a BEAR Market there are still ways to make money in the stock market which I will cover at that time.
Have a great weekend!