Stocks Tank, Bonds Surge, Gold Rockets
Stocks dropped over 2%, always a significant move one way or the other. Our firm always stays focused on the "big picture" and usually ignores daily movement in price (or tries to ignore; we're subject to the same emotions as everyone else, of course). But big moves naturally make me wonder.
One thing you can say is that investors and/or traders decided to cut out risk from their portfolios. That's why you see treasuries shoot up (and their yields drop like a rock). Stock represent risk; treasuries represent safety (although it beats me how they keep their "safe haven" status, given the U.S. government's fiscal disfunction).
Explanations begin with Europe's continuing economic woes. Or maybe the markets are disgusted with the debt ceiling being raised without much of anything being done to address deficits and the exploding debt. It makes for lots of chatter, but who really knows.
Market prices - ultimately - reflect the decisions of countless people who, in a sense, vote with their money. The thing is, daily movements like this can be deceptive. For example, they may be a kind of panic or even programmed selling. (Lots of computer programs direct trades these days based on "quantitative formulas" that trigger buys and sells when certain conditions appear.)
In the end, discipline has to take over and you do have to remind yourself that daily movements in prices really aren't that significant. The long-term and intermediate trend in prices is where you learn something about what's going on in the economy and the markets. Charts can be helpful here.
If you check your charts, you'll see That both the Dow and the S&P plunged below their 200-day moving averages, this after having broken through their 50-day averages. In addition, the 50-day moving average looks like it's now heading down, although it remains above the 200-day. If it were to cross the 200-day, that would be a significant negative indication. We'll have to watch it.
One other thing: volume really didn't spike up when the averages dropped - a relatively positive sign (you take the good news along with the bad, eh?)
Finally, the big trend does still remain positive. It will take more negative action to change that.
As for gold, it's now overbought, so look for the price to correct somewhat, although overall it's behaving quite bullish these days. Of course, the long-trend there is decidedly up.
Maybe I'll check Bloomberg news to see what the "experts" have to say about yesterday's dramatic action. Then again, maybe not.
One thing you can say is that investors and/or traders decided to cut out risk from their portfolios. That's why you see treasuries shoot up (and their yields drop like a rock). Stock represent risk; treasuries represent safety (although it beats me how they keep their "safe haven" status, given the U.S. government's fiscal disfunction).
Explanations begin with Europe's continuing economic woes. Or maybe the markets are disgusted with the debt ceiling being raised without much of anything being done to address deficits and the exploding debt. It makes for lots of chatter, but who really knows.
Market prices - ultimately - reflect the decisions of countless people who, in a sense, vote with their money. The thing is, daily movements like this can be deceptive. For example, they may be a kind of panic or even programmed selling. (Lots of computer programs direct trades these days based on "quantitative formulas" that trigger buys and sells when certain conditions appear.)
In the end, discipline has to take over and you do have to remind yourself that daily movements in prices really aren't that significant. The long-term and intermediate trend in prices is where you learn something about what's going on in the economy and the markets. Charts can be helpful here.
If you check your charts, you'll see That both the Dow and the S&P plunged below their 200-day moving averages, this after having broken through their 50-day averages. In addition, the 50-day moving average looks like it's now heading down, although it remains above the 200-day. If it were to cross the 200-day, that would be a significant negative indication. We'll have to watch it.
One other thing: volume really didn't spike up when the averages dropped - a relatively positive sign (you take the good news along with the bad, eh?)
Finally, the big trend does still remain positive. It will take more negative action to change that.
As for gold, it's now overbought, so look for the price to correct somewhat, although overall it's behaving quite bullish these days. Of course, the long-trend there is decidedly up.
Maybe I'll check Bloomberg news to see what the "experts" have to say about yesterday's dramatic action. Then again, maybe not.
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