Gloomy Market Days Do Experience Turnarounds
Market downturns can appear to be comprehensively discouraging and negative. But turnarounds can alter the perspective in just a day.
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One of the factors contributing to the success of investing and stock trading is the ability to see the silver lining in a cloud. Not every day is a bright one at the markets, and sometimes you could see a succession of gloomy days and events. But there are some bright moments, and there can be a turnaround even within a day. The Market Downturn of October 24 Did Have Some Positives Market downturns do happen from time to time in the stock market. Experienced analyst Martin Tillier says that since the end of the recession in 2009, there have been 12 selloffs at least. The past three weeks have seen that kind of a downturn. But selloffs have not been a terminal situation, and the market has always managed to bounce back. Still, this time stocks were sharply lower with investors really wanting to hear some positive news. That got to a head on Wednesday, the 24th of October, 2018. The day though did have some reasons for being positive. • It began with a negative price action. The Dow opened more than 250 points lower than the close on Monday. It continued to go down but when the day ended the index was only down by 125 points, much better than expected. The really bright part of what happened was that there wasn’t any significant factor that caused the turnaround. If the low opening of the index was the result of some major earnings disappointments, there really wasn’t any great news that influenced the index turnaround and made it more positive. • Tillier reckons that traders have realized that we’re getting to the end of the 2017 level. That’s causing traders to see the value in these levels. It shows there are still buyers here.
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• Tillier then points to a Wall Street Journal article that reveals that stocks and commodities in this market have been moving together. Bonds have also sometimes been moving along. That is an indication of fear taking over investors and traders instead of pure rational analysis. Fear is a transient thing and, though it isn’t a good sign that markets are driven by fear, moves motivated by fears do turn around at some point. When that turnaround happens, it usually ends up being very rapid. • Another positive factor in Wednesday’s market is how some individual stocks performed, primarily tech majors such as Microsoft ($MSFT) and Apple ($AAPL) that really had positive performances. It shows the fear factor is ending, and rationality is returning. Tillier wouldn’t conclude that the volatility period has ended though. And the fears can’t be brushed off as totally irrational since there are factors such as high interest rates, the increasing debt in the US, and tariffs. What can be said, though, is that there were some significant positive signs from Wednesday’s market that started with gloom but ended with a brighter note.
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