Risk/Reward Vol. 404
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Down 600 points on Monday. Closed on Tuesday. Up 1000 points on Wednesday. An 800 point swing from negative 600 to positive 200 on Thursday. And on Friday a slightly negative close after 19 direction changes. At the close the Dow Jones Industrial Average was up 2.5% for the week. Action in the S&P 500 was similar. NASDAQ did a little better. To characterize the week's market as a roller coaster would be an understatement. The bond market was less volatile, but see-sawed its way to lower yields by the close on Friday.
What does this all mean? Most commentators remained silent. The most interesting article was in Thursday's Investor Business Daily, following Wednesday's record setting 1000 point jump in the Dow. Terming the outsized one day price gain a possible "dead cat bounce", IBD noted that the nine biggest percentage gains in the history of the DJIA occurred in the midst of a bear market. In 1930, the Dow rose 12.3% in one day (Wednesday's bump was 4.5%) then fell 30% over the next 2 weeks. In 2008, the NASDAQ posted a one day rise of 11.8% only to fall 31% over the next five weeks. In 1932, the Dow jumped 11% only to fall 34% over the next several weeks. In 2000, the NASDAQ rose 10% in one day just before plummeting 46.5% over the ensuing 4 months.
Was this week a dead cat bounce or a legitimate first step in a recovery? Time will tell. Consistent with my thesis that politics dominates the market, I note that the day the Dow rose 1000 points The Donald was in Iraq and unable to tweet. No matter what Mr. Market experiences, may you and yours enjoy a healthy and prosperous 2019. On New Year's Eve, Barb and I are headed to the mountains of Colorado for some skiing with daughter Abby and her family. There may not be an edition next week.
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