Market Swings Are Becoming New StandardTAB 5 WEEKS AGO:
Day after day, stocks swing sharply by hundreds of points. Last week they tumbled 3 percent in the first 90 minutes of trading on Tuesday morning, then on Wednesday closed nearly 3 percent higher and dropped almost 3 percent on Friday. All of this on the heels of unusual back-to-back 4 percent leaps and dives in one week in August.
Now traders head into the week with fresh worries about the chances that Greece will default on its debt and the havoc that would wreak on European banks.
All of this anxiety has caused experts to ask whether there are new forces at work in the stock market that make trading permanently more erratic.
In fact, big price moves are more common than they used to be.
It has become more likely for stock prices to make large swings — on the order of 3 percent or 4 percent — than it has been in any other time in recent stock market history, according to an analysis by The New York Times of price changes in the Standard & Poor’s 500-stock market index since 1962.
Some experts see volatility as a problem because it can scare investors away from the markets, make companies reluctant to go public and undermine confidence in the economy, causing further drops in shares.
REGULAR READERS KNOW THAT WE SCOOP ALL THE BIGGIES ALL THE TIME WITH SHARP ANALYSIS AND BLUNT COMMENTARY.
MOB MENTALITY MARKETS: THE VOLATILE MARKETS SWING IN UNISONHERE ARE THREE GRAPHS OF TODAY'S TRADING AT 3 BIG MARKET INDICES IN THE USA.
THESE INDICES CONTAIN MANY MANY MANY DIFFERENT STOCKS, BUT TRADED AS IF ALL 3 INDICES WERE ONE STOCK ALL MOVING UP-AND-DOWN IN UNISON.
STOCK INVESTORS AREN'T MICRO-TRADING STOCK AND AREN'T BUYING SHARES IN COMPANIES.
STOCK INVESTORS ARE MACRO-TRADING MARKETS AND CURRENCIES AND ECONOMIES.
THIS IS ONE REASON WHY THE MARKETS FOR THE LAST SEVERAL YEARS HAVE BEEN MUCH MORE VOLATILE THEN IN PREVIOUS DECADES.
(75% OF THE BIGGEST ONE-DAY LOSSES AND ONE-DAY GAINS HAVE BEEN SINCE 2008, AND 90% OF THEM HAVE BEEN SINCE 9/11/01.)
YES: PROGRAM TRADING AND COMPUTER TRADING MAKES TRADING MORE STOCKS MORE RAPID, AND THIS ALSO HAS AN EFFECT ON VOLATILITY.
BUT THOSE PROGRAMS ARE WRITTEN BY HUMANS WITH TRADING BIASES (AKA STRATEGY), AND IN MY OPINION IT IS THIS STRATEGY WHICH UNDERLIES THE RECENT VOLATILITY.
I THINK MOST INVESTORS - ESPECIALLY THE PROFESSIONALS - TRADE STOCKS BASED ON MACRO-ECONOMIC MOVES AND NOT UNDERLYING VALUE OF THE SPECIFIC STOCK. (BUFFETT IS AN EXCEPTION.)
AND THESE PROFESSIONALS CONTROL THE MARKET DYNAMICS.
TODAY, INVESTORS BOUGHT AT HIGHER PRICES AT THE OPENING, THEN WHEN BERNANKE SPOKE THEY DUMPED STOCK, AND THEN THEY REGROUPED AND PAID HIGHER PRICES.
THE MARKET SWING WAS ABOUT DOWN 100, THEN 250 UP, THEN 300 DOWN (A SWING OF 550) AND THEN A SWING UP OF 600!
TO MOST PEOPLE THESE SWINGS ARE INSANE.
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