Why the big swings?

[shotgunner]

One thing that seems strikingly different this time is the number and frequency of multi hundred point swings up and down. Why? The market is at levels of 2003 and the late 90's. We saw a 50% drop in equities in the '01 and '02 bear market but not such wild swings outside of the post 9/11 attack. Bull vs. Bear, fear vs. greed, good news vs. bad news we have seem it all before but not with such big swings up and down in terms of numbers and percent on the Dow and S&P, what gives?

 

[ziggy29]

Simply put -- people don't know whether to panic about what might happen or to rush in because it feels like a bottom and stocks look so cheap right now.

Fear and greed are very powerful investing emotions, but fear usually trumps greed in uncertain times.

 

[Dawg52]

Because nobody thinks the economy will be worth a crap for the next couple of years. Doom and gloom for several months to come. My 5 day play is now a 5 year plan. Stocks suck!

 

[FIREd]

I have no answer for you but I am blaming the hedge funds... It's always fun to blame rich people...

 

[NW-Bound]

I heard/read and believed that institutional investors are "deleveraging" and have to sell to raise cash. In addition perhaps people are now opening their quarterly 401k statement and scream to their account custodian "SELL"...

I believe the story because I have been watching stocks that are traditional safe haven for a recession: consumer staples and utility stocks. They are all being sold now.

Too late to sell, too early to buy, in my opinion. Hang in there, keep your powder dry. Dawg, why aren't you golfing?

 

[Dawg52]

Too late to sell, too early to buy, in my opinion. Hang in there, keep your powder dry. Dawg, why aren't you golfing?

Just back from golf. I guess I need to pitch a tent on the golf course and not look at the market for the next couple of years.

 

[NW-Bound]

But if you don't look, you may miss the market bottom

 

[Notmuchlonger]

See i knew we would have a big rally. I was just a couple days late.

 

[CompoundInterestFan]

Because nobody thinks the economy will be worth a crap for the next couple of years. Doom and gloom for several months to come. My 5 day play is now a 5 year plan. Stocks suck!

Dawg, as someone with absolutely no medical training, I strongly advise you to stop looking at the market on a daily basis. I know it's like watching a train wreck, but really, you've got to give yourself a break.

 

[Dawg52]

Dawg, as someone with absolutely no medical training, I strongly advise you to stop looking at the market on a daily basis. I know it's like watching a train wreck, but really, you've got to give yourself a break.

Where's my medicine?

 

[soupcxan]

You guys are all wrong. It's a sign of the apocalypse.

 

[ziggy29]

Oh, and one other thing: As soon as you see Bush, Bernanke or Paulson start to speak, short the crap out of the market immediately and cover at the end of the day. Might be a way to get some of the losses back. The market is clearly showing no confidence in this trio. Every time they talk, the market goes into a death spiral.

 

[Texican]

Wild Swings

My guess is Greed is still at work and those that rode the 900 point wave two days ago are cashing in. Chances are tomorrow or Friday they will jump back in and we will see another good uptick followed by another drop next week. There is money to be made in the short swings. The wide swings will eventually settle down and the long slow plod back to 14000 will begin again...

 

[dex]

One thing that seems strikingly different this time is the number and frequency of multi hundred point swings up and down. Why? The market is at levels of 2003 and the late 90's. We saw a 50% drop in equities in the '01 and '02 bear market but not such wild swings outside of the post 9/11 attack.

The previous time period focus was primarily a market segment - tech stocks (although other stocks got caught up in the overvaluation)

Currently the focus is macro - world wide liquidity, recession, it is/will (today's focus on retail sales) focus on micro issue over time resulting in the swings.

 

[Bestwifeever]

See i knew we would have a big rally. I was just a couple days late.

Maybe you were a couple days early and the markets are trying to get as low as possible to make the NML rally look even bigger....

 

[ziggy29]

The previous time period focus was primarily a market segment - tech stocks (although other stocks got caught up in the overvaluation)

I think unlike when the tech bubble popped, there were still undervalued segments of the stock market -- small caps and REITs in particular never much participated in the run-up from 1998 to early 2000. So when the tech bubble popped and spread to large cap U.S. stocks, some of that fleeing money went into small caps and REITs for redeployment. Folks who diversified asset classes didn't get badly hurt if they weren't overweight tech.

The only thing that works this time is government-guaranteed cash.

 

[TromboneAl]

Just thinking out loud: Could it be the increased number of people on the Internet? More people checking online throughout the day, watching analysis, easily selling or buying shares?

True, people could do that in 2003, but now it's easier than ever, and even grannies have their computers.

 

[harley]

Where's my medicine?

Dawg, if you could do me a favor? I've got a buy order in for BUD at $50, and I suspect if you took the weekend off from medicating yourself I'd get the price drop I need. Thanks.

 

[armor99]

Just thinking out loud: Could it be the increased number of people on the Internet? More people checking online throughout the day, watching analysis, easily selling or buying shares?

True, people could do that in 2003, but now it's easier than ever, and even grannies have their computers.

I believe that is EXACTLY it! I think when people could only check stocks once a day, and usually in hindsight, it tended to smooth out this sort of thing. Now that anyone can be a daytrader everyone is trying to be faster ,and faster at timing the market. Plus there all of those automated software engines out there now that will automatically buy and sell stocks once predetermined limits are set.

 

[lazygood4nothinbum]

what big swing? i didn't notice any big swing...

 

[NW-Bound]

The only thing that works this time is government-guaranteed cash.

Feels that way... except there's more where that comes from.

Modern day technology is great. They don't even have to start up their printing press. All they have to do is to tweak the bits in the Fed Reserve computers that keep scores. And do it remotely via the Internet too. I am waiting for them to "readjust" some digits in my accounts.

There are so many "innocent" stocks with P/E in low single digits now... Of course in the near future their earnings are going to drop, but won't we need them in the future, i.e. grow our own food and barter ?

By the way, I remember during the rise of the dot-coms, people used the term "old economy" to deride old stodgy companies that actually produced something, rather than Web sites. Of course they came back. These are thrown out today too. Everything is on sale.

So many good stocks, so little precious FERNs (Federal Reserve Notes, commonly known as greenbacks)... But wait, they will be dropping them from helicopters...

 

[Notmuchlonger]

Maybe you were a couple days early and the markets are trying to get as low as possible to make the NML rally look even bigger....

I know Im doing the best I can

 

[Gardnr]

I believe the story because I have been watching stocks that are traditional safe haven for a recession: consumer staples and utility stocks. They are all being sold now.

Yep, everything is being taken out back and shot! The good thing about that for those with cash to buy is that you can find some good bargains on companies that have been lumped in with everything else. And when all the panic is out of the air (some day!) the good companies should bounce back up once some fundamental analysis is being done again. I've been picking up some good solid dividend payers. Hedging my bets for a long drought in the market.

 

[NW-Bound]

Gardnr:

My ideas exactly. Of course I hope that in a year or two, things will turn back to normal. But in case the recession is prolonged, due to people's sentiment more than anything else, good "stodgy" dividend payers are a safer bet than technology stocks.

 

[Gardnr]

So many good stocks, so little precious FERNs (Federal Reserve Notes, commonly known as greenbacks)... But wait, they will be dropping them from helicopters...

Boy do I know what you mean! The more I look the more I see good old "stodgy" companies, paying good solid dividends, that have been killed in this market. I need more cash!