Stock market roller coaster strikes yet again
Geoff Zahler
“Did you see the Dow Jones the other day? It was down over 300 points!”
“Yeah, but the day before, it was up 500!”
“It has to be at the lows, I think it’s a good time to buy.”
Does this sound like a familiar conversation?
With the U.S. Treasury and Congress dealing with who is going to get a piece of the $700 billion marked for handouts from the bailout, along with the continued uncertainty that is surrounding the severity of the recession we are heading toward, the markets continue to show that they really do not have any idea what to make of the situation.
Markets fluctuate, but the fluctuation we have seen in the past two months is really unprecedented. How unprecedented? The answer lies in the numbers.
The Dow Jones started the millennium at over 11,000 points and has fluctuated between 7,286 and 14,164 points, which represents a very large range of trading. However, prices usually do not go up or down a significant amount in any one day. Instead they creep along and make their moves over weeks and months.
That was, until recently.
Since the first day of trading of 2000, there have been only 75 days out of a total of 2,242 trading days with more than a 300-point move, either up or down.
The 75 days with a 300-point move represent just over 3.3 percent of the total days.
However, 30 of these 75 days have come since Sept. 1 of this year! Close to 40 percent of all the big point swing days have come in the past 64 days of trading.
This also shows that in the past 64 days of trading, almost half of the days have had movements of greater than 300 points.
What does this mean, historically? The short answer is that the market does not know what to make of any situation. As of Dec. 1, the Dow was down 680 points, probably due to a very bleak Black Friday at the mall.
Traders seem to be watching the news tickers as much as the fundamentals of the stock and large swings, either positive or negative seem commonplace.
From a pure point perspective, we have never before seen such swings in the history of the market. Remember, this is based on the level of the Dow, and I am not discussing percentage moves. Until the economy begins to fully realize where we are headed, I expect many more of these 300-point moving days.
From a personal finance perspective, this is not the correct time to try and time the market. In the past few days, the market has been close to testing the lows set in October, representing a possible bottoming out of the market.
This usually represents an opportune time to invest in the market, but with the amount of volatility lately and the lack of knowing exactly how much more money this bailout may cost the citizens of this country, these lows may only be the beginning of a further bottoming out.
So before you go out and gamble next semester’s tuition loan check on AIG stock, you may want to pay your tuition first.
Geoff Zahler is a columnist for The Nevada Sagebrush. He can be reached at gzahler@nevadasagebrush.com.
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December 2nd, 2008 at 2:20 pm
‘Bleak Black Friday? - it was reported everywhere that the numbers were UP from last year. What you’re seeing now is long term investors pulling out of the market now and moving assets offshore in anticipation of higher capital gains tax.