Wednesday, October 10, 2018

BREAKING NEWS! Dow Logs 830-Point Loss and Suffers Worst Day in 8 Months; Nasdaq Sees Ugliest Day in More Than 2 Years

Source: MarketWatch

The Dow Jones Industrial Average on Wednesday marked its worst day since February, with a decline of more than 800 points that highlights the market's fragile state as bond rates rise.

The Dow DJIA, -3.15% finished the session down nearly 828 points, or 3.1%, at 25,600. representing its worst single-session loss since Feb. 8, when the market tumbled into correction territory, defined as a 10% drop from a recent peak. But it was the Nasdaq Composite Index COMP, -4.08% known for its technology and internet-related constituents, that took it squarely on the chin. The index tumbled 316 points, or 4.1%, marking its ugliest session since June 24 of 2016, according to FactSet data.

The S&P 500 index SPX, -3.29% tumbled 3.3%, notching its steepest one-session slide since early February. All 11 of the S&P 500's sectors finished the session squarely in the red, led by declines of at least 3% in commmunications services, energy, and consumer discretionary.

The S&P 500's tech sector ended down 4.8%. Shares of Inc. AMZN, -0.87% finished the day down a whopping 6.2%, representing its worst one-day loss since 2016.

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Monday, October 8, 2018

These Athletes Have More Advantages

Athletes who grew up playing pick-up games of baseball, kickball, basketball, street hockey, and other sports with neighborhood kids may have had some advantages they didn't recognize.

A Brazilian research study, cited by Freakonomics Radio's show Here's Why You're Not An Elite Athlete (Ep. 351), found children who played sports in unstructured environments showed more tactical creativity and tactical intelligence than children who played in structured environments.
In addition, playing multiple sports may be more beneficial than specializing in a single sport, at least when it comes to soccer.

A study by Manuel Hornig, Friedhelm Aust, and Arne G├╝llich reviewed the training of soccer players in Germany. Practice and play in the development of German top-level professional football players, which was published in the European Journal Of Sports Science, reported athletes who went on to play for the German national team played more pick-up sports as children, and played more types of sports in adolescence, than players who did not make the German team.

"The trick is not just to get lots of children playing, but also to let them develop creatively. In many countries they do so by teaching themselves…Such opportunities are disappearing in rich countries," reported The Economist.

Maybe we should rethink our tactics.

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Why Didn’t Stock Markets Move Higher?

The stock market tends to be a leading economic indicator.

Last week offered some insight to economics and stock market behavior. The U.S. unemployment rate reached its lowest level since 1969 and wages moved higher, yet major U.S. stock indices lost value.

Why didn’t stock markets move higher?

The answer is stock prices tend to be leading indicators. They reflect investors’ expectations for the future. Last week, investors may have been thinking like this:

When unemployment is low, companies cannot always hire enough workers…
To hire more workers, companies raise wages…
Higher wages give workers more spendable income…
More spendable income produces higher demand for goods and services…
Higher demand for goods and services leads to higher prices…
Higher prices (inflation) cause the Federal Reserve to increase the Fed funds rate…
An increase in the Fed funds rate pushes interest rates higher…
Higher interest rates make borrowing more expensive…
Higher borrowing costs may slow business spending…
Slower business spending may cause profits to fall…
Falling profits may cause investors to sell shares…
When investors sell shares, stock prices may drop.

In general, “…while it usually takes at least 12 months for any increase or decrease in interest rates to be felt in a widespread economic way, the market's response to a change (or news of a potential change) is often more immediate,” explained Mary Hall on

At the end of last week, 10-year Treasuries yielded 3.2 percent. Daniel Kruger of The Wall Street Journal reported, “U.S. government bond yields rose to their highest level in years Friday as investors reconsidered the strength of the U.S. economy while selling off stocks that could be hurt by higher borrowing costs.”

One of the best ways to manage stock market volatility is to have a well-allocated and diversified portfolio.

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The Dow Jones Closes at a 52-Week High

The Dow Jones Industrial Average notched its 15th record close of the year this week, but not all analysts were enthused.  Jason Goepfert, president of Sundial Capital Research, noted that the overall market isn’t nearly as bullish as the Dow would indicate.

The Dow Jones Industrial Average is made up of just 30 of the largest stocks traded, but for a bigger picture many analysts turn to measures that track the thousands of stocks traded by looking at a measure known as ‘market breadth’.  The disconnect between the benchmark index and overall market breadth, such as is happening now, tends to occur when a narrowing group of stocks props up the overall market.

Goepfert tweeted a chart showing past instances when the Dow hit a 52-week high at the very same time that less than 50% of all stocks traded on the New York Stock Exchange were above their long-term 200-day moving average.  The last two times this scenario has happened were a cluster in 1999, right before the crash of 2000, and again in 2007, just before the financial crisis of 2008-9.  (Chart from SentimenTrader)