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Thursday, October 6, 2022
Today’s newsletter Jared Brickle, Yahoo Finance market-focused reporter. follow him on twitter @SPY Jared.
Stocks recouped early losses on Wednesday as the Dow Jones Industrial Average posted its best return since 1938 early in the quarter. Impressive, right? Traders might be tempted to think we’ve hit a low, but it’s all up from here.
But before we get too excited, let’s have a candid discussion of market statistics.
Headlines that begin with “best” or “worst” dominate today’s financial media as it has been a tumultuous year. This is to be expected when volatility rears its head. Days with record returns tend to focus on the worst results. It seems that the market gods are simply tossing a coin.
So how do you understand the market without getting whiplash? The key is to distinguish the true signal from all noise. And while the public pays attention to price movements, most of them are just noise.
True signals appear infrequently and can be difficult to identify. Execute the current price action. He started the week with two days of gains, the first time since the global financial crisis in late 2008 that the S&P 500 has posted consecutive gains of more than 2.5%.
At the time, the big gains made as a result of the bull market practically came afterward. Cluster of ‘signals’ in 2008 — so this information may not have been very helpful to investors trying to time lows.
First, in September 2008, it rose 2.5% for two consecutive days. This was pretty early in the bear market. Buying that event was a clear loser, however, as the index soon fell sharply.
Then three sets of similar consecutive gains occurred in late November and early December. Perhaps these were close enough to the lows that they could have been useful for long-term traders. However, if an investor had bought immediately after these gains, they would not have made a profit until about five months later.
Further back in market history, we see two instances of this 2.5% two-day thrust signal after the dotcom bubble burst in 2000. Two years later, in October 2002, the price bottom was completely captured.
Let’s go back to the fourth quarter of 2022. We are all waiting for inflation data to cool down so the Fed can stop raising rates. That certainty calms the market and may pave the way for the market to rise steadily again. When a clearer picture emerges, cash will be needed to buy what many see as a generational opportunity to get stocks cheap.
You may be buying now. If you’re investing according to a predefined investment or trading plan, that’s fine. But the riskiest action we can take is to get caught in the headlines and run out of liquidity before this bear finally decides to hibernate.
what to see today
economic calendar
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7:30 AM ET: challenger job cuty/y, Sep (30.3% of previous month)
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8:30 AM EST: first unemployment insurance applicationfor the week ending October 1 (forecast 203,000, previous week 193,000)
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8:30 AM EST: Continuous billingweek ending Sept. 24 (1,387,000 expected, 1,347,000 last week)
Earnings
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angio dynamics (Ango), Conagra (CAG), constellation brands (STZ), Levi Strauss (Levi), McCormick (MKC)
Yahoo Finance highlights
Labor shortage: ‘We need to start thinking that robots can do some of these jobs,’ says expert
Housing ‘broke by the Federal Reserve’, expert says
Elon Musk’s latest 180 deals another blow to Donald Trump’s upstart media company
Oil: ‘We’ll see $65 before we see $100’ on WTI, analyst says
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