What Really Happened in the Stock Market Last Week

The stock market had a bumpy ride last week. We're not used to that. To get some idea of how unused to it we really are, this weekly chart shows that Dow going back five years. Weekly charts smooth out the price action a bit. Some like using weekly's to quell the "noise" you get in daily charts. They consider weekly's a bit more reflective of longer trends. If that's true, then the longer trend really doesn't seem much affected by last week's gyrations.

 

Charts are by no means fail-safe prognosticators of future trends. But they can give us a snap-shot of recent or extended price action to put things in perspective. In that light, you see the last real down-drafts in the Dow: August 2015 and January 2016. The price plunged below the 50-day moving average. But notice how it stopped at or before crossing the 200-day average. 

As for recent price action, it's quite clearly elevated far above the 50-day MA. Commentators who haves sensed some sort of "propping up" of stock prices may have a point. As for those trumpeting the return of "volatility," they're referring to the VIX having spikes up due to the fall in prices. But that's happened before during this elevated run. So concluding that the VIX is entering a new phase - while it may - isn't assured.

At the end of the day, this snap shot tells us we've got to hold off on any dire forecasts, at least those based on recent ongoing price action. Of course, other events may be looming that could change things dramatically. What they might be could be a good subject for a future post. But when we look at what we've got in hand - the price action - there's, frankly, not much going on.

At least that's my take on last week's mildly turbulent action.