Actual Buyers

A lot of the movement in stocks over the past few trading sessions has happened overnight. During the past 5 days, the overnight gaps have totaled 13.14% which is something SPY hasn’t done since October 2008. What’s interesting is that over the last two days we’re finally seeing some buying taking place between 9:30 and the close. Today was the first back-to-back days since October 2014 that SPY closes 1% higher than the open. Before that you have to go back to October 2011.

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As you can see on the chart, these strong back-to-back days occurred at previous market bottoms. While this might be interesting, I wouldn’t be too quick to infer that what meant something in the past will have any relevance this time around. It’s almost never that easy.

What Do People Hear?

When markets enter “correction territory” and volatility picks up, people are much more likely to tune into the TV or read a few articles. The financial media lives for these sorts of markets the same way The Weather Channel yearns for super storms. ” Their job is to sell advertisements, not make their audience better investors. Like my friend Phil Pearlman says, “the higher the Vix, the higher the clicks. With this in mind, take a look at the tweet I saw yesterday.

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Continue reading “What Do People Hear?”

A 0.5% Day

Today we saw what is typical of an unhealthy stock market. This morning, when it looked as if stocks might have a monster day, I tweeted that 22 of the 25 single best days since 1970 occurred under the 200-day moving average. The point is that outlier days, both to the upside and to the downside, tend to happen in sick markets.

Today, the S&P 500 got as high as +2.9% from the previous close and fell as much as -4.15% from those highs. This is just the 59th time this has happened in the last 11,518 days, or 0.5% of the time. What you’ll notice in the table below is that this type of day has happened in pretty ugly markets. Continue reading “A 0.5% Day”

Morning Reading, Correction Edition

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“U.S. stocks were up nearly 400% in the 1980s. All anyone remembers is the 1987 crash.” (Ben Carlson)

“Corrections come a lot slower than anyone expects, but once they happen they escalate faster than most could imagine” (Ivanhoff)

“Indices have a tendency to come back, stocks are a different story, most don’t make it.” (Frank Zorrilla)

“What multiple would you pay for the earnings of a public company’s stock if it was never going to drop?” (Josh Brown)

“Pullbacks are part of the game” (Ryan Detrick)

“Watch out for the ‘I told you so crowd'” (David Fabian)