Down goes the Dow

Here's what happened:

When the Dow hit 17,000 people with influence sold off their shares or bought short.

They drove the market down.

And as it went below 16,400 they bought back in, riding the gains back up towards 17,000.

They made money off of a net zero gain.

While others bought at 17 and sold at 16,4.

Let's just hope everyone took advantage of the sub-17K dip, cause it's short-lived life is nearly over.

* wrote:

Here's what happened:

When the Dow hit 17,000 people with influence sold off their shares or bought short.

They drove the market down.

And as it went below 16,400 they bought back in, riding the gains back up towards 17,000.

They made money off of a net zero gain.

While others bought at 17 and sold at 16,4.

don't assume that there is some cabal of smart people who know exactly what to do at all times - the people who drive the market on a day to day basis are traders - as a group they probably break even - winners and losers. I guarantee a bunch of momentum traders sold out at the recent lows because some index crossed some moving average line, or some technical indicator went bearish.

in other words, saying 'they drove the market down' is not accurate or helpful in any way.

as I continue to try to avoid trading:

article today on why the dow should not be considered a good metric for the market (NB: the performance numbers cited don't include dividends):

If you follow the Dow Jones industrial average, you may be wasting your time. And if you invested in the Dow instead of the S&P 500 this year, you’ve actually missed out on a lot of gains.

Despite a 1 percent rally on Monday, the Dow is up just 1.6 percent since the start of 2014. Meanwhile, the S&P 500 has gained 6.7 percent.

So what explains the discrepancy?

“For at least the past decade, if not longer, [the Dow] really is too concentrated, too focused on large caps,” said Erin Gibbs, equity chief investment officer at S&P Capital IQ. “Inherently, [it] has some problems with it being representative of the overall market.”

While the Dow is composed of just 30 stocks, the S&P 500 index is a market capitalization-weighted index of 500 companies. The funny thing is that both are among the 830,000 indexes administered by S&P Dow Jones Indices.

“The S&P 500 really just has a much more diverse and broad array of industries and sectors you can have exposure to,” said Gibbs. “So our preference is heavily the S&P 500, but mainly because of the valuations and the growth when you look at the two indexes.”

According to Gibbs , the outperformance may continue. The S&P 500 is valued at roughly 15.6 times the next 12 months’ earnings, while the Dow is at 16.2 times its forward earnings.

Ari Wald, head of technical analysis at Oppenheimer, agrees with Gibbs.

“I don’t think the Dow is a great reflection of the market anymore,” Wald said. “It only covers 30 stocks. It also puts too much emphasis on the price rather than a market’s capitalization.”

When comparing the top-weighted stocks in the Dow versus the S&P 500, one can see just why the latter has done much better, said Wald.

We could hit 17,000 again this week. I didn't expect that.

I believe the S&P futures contract hit an all time high today.

all time high for the sp500 today

but other indices are not following - that's not great. Seems like a few big names are leading the sp500 rather than a broad rise.

small caps are still a big 5% below their all time highs.

europe is 4% below its highs

but emerging markets are at highs - that's good news.

I'd be cautious here - I don't expect a big rally. It seems too narrow based - apple, msft, jnj - megacaps are leading. that's not the best situation.

agip wrote:

S&P 500 now within a percent of its all time highs, and up 8.3% for the year. I'll take 1% per month and be very very happy. As of today, this is yet another good year for investors.

I'll call a win for myself and the small cap/large cap indicator - worked perfectly this time.

For me, I'll call it an OK year so far. I'm up just over 5% as of this morning.

Flagpole wrote:

agip wrote:

S&P 500 now within a percent of its all time highs, and up 8.3% for the year. I'll take 1% per month and be very very happy. As of today, this is yet another good year for investors.

I'll call a win for myself and the small cap/large cap indicator - worked perfectly this time.

For me, I'll call it an OK year so far. I'm up just over 5% as of this morning.

yeah - I'm up around the same - maybe a little more.

Not sure why this has been a tough year to match the indices - the US is up 8.2% (vanguard total market index) but I am up just 5.5 or 6.0%. I rarely diverge that much from that benchmark.

I think it is because the rest of the world has not been very good - my overseas investmetns (+2%) have dragged me down, as have US small caps. (+0%)

But I'm trailing even world stocks on average - those are up 6.5%.

But yeah - it's still been an ok year overall.

Dow 17055

I didn't expect it to break 17,000 again until the second half of September.

4.7% in 10 days for US stocks

I always say they go down faster than they go up, but sometimes that's not true. What a rally.

Randy Oldman wrote:

Dow 17055

I didn't expect it to break 17,000 again until the second half of September.

Yeah, I had it pegged for September 24.

more all time highs around the globe - esp the US. The Sp 500 hit 2000 for the first time ever today.

you bears have to look at the last 5 years of repeated new highs and say 'yeah, ok, I know, but this is the last new high'

good luck with that

DJIA comes out of the gate STRONG on Monday morning, up 113 now to 17,115

Right on track to meet my prediction earlier in this thread, I must say.

Prices in a "free market" are those freely negotiated between a willing seller and a willing buyer. Since there is so much money floating around in the investment classes, it only stands to reason that prices of securities should rise, as they are.

However, increasing prices make them less attractive, relative to other investments; not necessarily in an absolute sense, but in a relative sense. Earnings cannot keep pace, IMO the "real economy" is not rising as quickly as is the amount of money in circulation; therefore, gains need to come from price increases. Price increases won't go on forever, because there will be a wave of people taking their money out of the markets, which will drive down prices to some extent. To me, it still looks like a large-scale pump-and-dump.

Some will make off like bandits, some will get burned, same as it ever was. Here's something, though: IMHO, after the sell-off, I think that many who exited the market will, of necessity, re-enter. There's still nothing else out there, in general, that is as good as the market, relative to how much work you need to put in. Sitting in cash sounds great to some, annuities to some, bonds to some, real estate to some, physical metals to some, etc. Unless interest rates rise significantly, there will be nowhere else reasonable to park money, other than in the markets. What they may lack in return, they more than make up for in convenience, low maintenance, lack of sophistication like capital acquisition and depreciation, and low transaction costs.

And, like I said before, the rich don't much care if they are making "only" 4% or 5%, rather than 20 or 30%--at 4 or 5%, they are still raking in a lot of money, on top of the lot that they already have. (I say "don't much care" understanding full well that they do, in fact, care.)

So much for diversification for the everyman. REAL diversification, I mean, NOT diversification within the markets.

For now, the DJIA screams upward!

agip wrote:

more all time highs around the globe - esp the US. The Sp 500 hit 2000 for the first time ever today.

you bears have to look at the last 5 years of repeated new highs and say 'yeah, ok, I know, but this is the last new high'

good luck with that

Yep. People make excuses to not invest. Today's young people (under 30) invest less than that group has in a long long time. It's silly. People don't want to make a budget and stick to it. It is not difficult to do.

People on this website have told me everything from the Dow will go to ZERO to 12,000 is the highest it will be for 10+ years and on and on. It's all BS. Just below death and taxes is that the stock market will go up.

Pay off debt, take on reasonable expenses, and invest 10-20% of your income OR MORE (preferably 20% and at least 15%) into the market within retirement funds. Do anything else outside of retirement funds. Not that hard.

S&P 500 2K!!!

Gonna mortgage the house and put it all in the market!

lol

But you know, at current low rates and IMO over-valuations in some real estate markets, why the heck not?

lol

DJIA pulling back a bit, but still up 82 on the day.

Fall is closing in fast, exciting times ahead!

Tinfoil hat wrote:

S&P 500 2K!!!

Getting close to a real all-time high.

It is an all-time high.