U.S. stocks in free fall

[Forester]

Embarrassing disaster for the recency bias people (US megacap 60/US bonds 40), gold & SCV doing much better.

[Enzo IX]

This technology bubble was kind of easy to see, felt like a mini 1999.

Better it happen now, then let it get too big and really mess up future returns. Think of the lost decade after 1999.

Easy to say? Like 1999? Please share your insight on how you came to this conclusion.

Just my opinion but,

too many people talking about how much money they were making in the stock market on a daily basis,

investors day trading based on upward price momentum only, one electric vehicle company had a market cap bigger than Ford and they haven't even produced one car yet

people using leverage to buy stocks,

breadth of the market was terrible,

etc.

Bottom line is the market is the market and it will do what it does, bubble might be tad much, but I think technology sector was due for a correction.

[Doom&Gloom]

October came early this year.

It's Swoontember!

[langlands]

Embarrassing disaster for the recency bias people (US megacap 60/US bonds 40), gold & SCV doing much better.

Cash is doing better than gold. I wouldn't call this a shining moment for gold.

[burritoLover]

Two days is meaningless - we could be back to all-time highs next week.

[Day9]

I’m more bummed out by what my bonds (BND, -0.48%) are doing today than my equities.

Remember long term correlations between stocks and bonds is about 0 (uncorrelated). Though in stock market crashes high quality bonds especially treasury bonds have negative correlation to stocks

[Robot Monster]

I’m more bummed out by what my bonds (BND, -0.48%) are doing today than my equities.

The Chief Fixed Income Strategist at Schwab tweeted,
"Yield curve steepening trend continues. Since the #Fed stepped into the market to provide #liquidity and support, the #yield curve has been steepening. Positive economic data continue to reinforce the trend as #deflation fears ebb."

Funny how positive economic data can be a double-blow to both stocks and bonds!

[000]

Embarrassing disaster for the recency bias people (US megacap 60/US bonds 40), gold & SCV doing much better.

Every dog has its day.

[TheTimeLord]

Days like the past 2 days demonstrate why the vast majority of people should be index investors following an IPS, otherwise their emotions would runaway with them.

[BarbBrooklyn]

October came early this year.

It's Swoontember!

[mega317]

I look forward to comparing the "stocks going on sale!" posts with the "stocks are overvalued" posts from 2 weeks ago.

[Stinky]

Can the S&P hold above 3,400 today?

[lostdog]

International heading into positive territory.

[A_Bond]

Dow just briefly touched positive territory. We could be looking at a nice melt-up in the last hour.

[FIREchief]

I'm a bit suspicious of the heavy selling, all in 2 days and right before a holiday weekend. That doesn't strike me as "normal" market action - especially on such heavy volume. I get that there is likely 'some' profit taking involved, but it's hard to fathom that buyers were falling all overthemselves just 2 short days ago and now are falling all over themselves to sell at prices significantly lower than they were willing to buy at. Especially when there's been no major 'bad' economic or political news to trigger the abrupt change.

There has been significant news. The jobs market is recovering much faster than the market anticipated. Consequently, the likelihood of more stimulus from the powers that be has presumably gone way down, and the market was betting on that stimulus.

Beyond that, the market was going up by leaps and bounds over the prior two weeks. People don't mind upside volatility like that, but it has often led to significant downside volatility, as we've seen the last two days (i.e. volatility clustering).

Are you talking about the possible second stimulus check?

I'm talking about any kind of stimulus. Obviously, the Fed and Congress would take different paths to achieve it, but all of those paths will be impeded by the economy making a quick recovery. That's presumably why stocks are tanking.

^^^this. When I saw the unemployment numbers (which, surprisingly(?) I had to go looking for....), I connected the dots and it all made sense.

[langlands]

I'm a bit suspicious of the heavy selling, all in 2 days and right before a holiday weekend. That doesn't strike me as "normal" market action - especially on such heavy volume. I get that there is likely 'some' profit taking involved, but it's hard to fathom that buyers were falling all overthemselves just 2 short days ago and now are falling all over themselves to sell at prices significantly lower than they were willing to buy at. Especially when there's been no major 'bad' economic or political news to trigger the abrupt change.

There has been significant news. The jobs market is recovering much faster than the market anticipated. Consequently, the likelihood of more stimulus from the powers that be has presumably gone way down, and the market was betting on that stimulus.

Beyond that, the market was going up by leaps and bounds over the prior two weeks. People don't mind upside volatility like that, but it has often led to significant downside volatility, as we've seen the last two days (i.e. volatility clustering).

Are you talking about the possible second stimulus check?

I'm talking about any kind of stimulus. Obviously, the Fed and Congress would take different paths to achieve it, but all of those paths will be impeded by the economy making a quick recovery. That's presumably why stocks are tanking.

^^^this. When I saw the unemployment numbers (which, surprisingly(?) I had to go looking for....), I connected the dots and it all made sense.

I don't buy it. What changed over the course of the last four hours to reverse nearly all the losses? A large part of daily market movements cannot be explained by "news" and is simply the work of "animal spirits" to borrow a term from Keynes.

[willthrill81]

There has been significant news. The jobs market is recovering much faster than the market anticipated. Consequently, the likelihood of more stimulus from the powers that be has presumably gone way down, and the market was betting on that stimulus.

Beyond that, the market was going up by leaps and bounds over the prior two weeks. People don't mind upside volatility like that, but it has often led to significant downside volatility, as we've seen the last two days (i.e. volatility clustering).

Are you talking about the possible second stimulus check?

I'm talking about any kind of stimulus. Obviously, the Fed and Congress would take different paths to achieve it, but all of those paths will be impeded by the economy making a quick recovery. That's presumably why stocks are tanking.

^^^this. When I saw the unemployment numbers (which, surprisingly(?) I had to go looking for....), I connected the dots and it all made sense.

I don't buy it. What changed over the course of the last four hours to reverse nearly all the losses? A large part of daily market movements cannot be explained by "news" and is simply the work of "animal spirits" to borrow a term from Keynes.

I don't know why the market has pared most of its losses from earlier in the day, but I do know that market participants aren't randomly throwing darts to determine the prices at which they will buy or sell, even I don't understand their reasons. Of course animal spirits can take hold, but they are not wholly responsible for all market movements.

[AerialWombat]

...simply the work of "animal spirits" to borrow a term from Keynes.

I always just assume that distilled spirits have something to do with it.

[willthrill81]

...simply the work of "animal spirits" to borrow a term from Keynes.

I always just assume that distilled spirits have something to do with it.

I just learned yesterday that the term 'spirits' being applied to alcohol was actually related to the ethereal 'spirits' (i.e. ghosts).

Liquor is a base alcohol that has the water physically taken out through the process of distillation, which increases the alcohol concentration through evaporation. Then the alcohol is condensed down. In other words, the spirit of the liquor is leaving the lower alcohol base liquid, then coming back down in a purer form to drink. So we’re drinking the spirit of fermented liquid.

https://vinepair.com/articles/why-liquo ... .%E2%80%9D

So maybe Bogle's animal spirits lead market participants to imbibe in liquid spirits and act accordingly in a vicious cycle?

[Cheez-It Guy]

My 401(k) contribution to the institutional version of VTSAX (VITSX) thanks the last two days!

[occambogle]

What changed over the course of the last four hours to reverse nearly all the losses? A large part of daily market movements cannot be explained by "news" and is simply the work of "animal spirits" to borrow a term from Keynes.

Seems like there might be weird stuff going on beyond the sight of us mere mortals...

https://www.cnbc.com/2020/09/04/softban ... tions.html

[FIREchief]

I'm talking about any kind of stimulus. Obviously, the Fed and Congress would take different paths to achieve it, but all of those paths will be impeded by the economy making a quick recovery. That's presumably why stocks are tanking.

^^^this. When I saw the unemployment numbers (which, surprisingly(?) I had to go looking for....), I connected the dots and it all made sense.

I don't buy it. What changed over the course of the last four hours to reverse nearly all the losses? A large part of daily market movements cannot be explained by "news" and is simply the work of "animal spirits" to borrow a term from Keynes.

I really wasn't selling, just agreeing with willthrill81's opinion. I was looking at the past two days, not any subset of hours. The market was suddenly deflating and while, to your point, there are a plethora of possible explanations (to include animal spirits), I believe that the unexpected large drop in unemployment (again) relieves pressure for additional free money from the fed. The market has grown quite fond of free money, and any signs that the helicopter may be landing are often met with some short term negative volatility. Can I prove this statistically?? Heck no. But when it comes to the market, nobody can really ever prove anything because nobody knows nothin'.

There's really nothing actionable here, but the moderators have tended to indulge this tread more than typical, so we're all likely just discussing this stuff for "fun."

[000]

VTI hasn't seen a day where (High - Low) / |Close - Open| was this large since March.

With the three day weekend and ongoing volatility clustering, I am looking forward to some exciting market action on Tuesday!

[Chuck107]

.....

[Impatience]

Embarrassing disaster for the recency bias people (US megacap 60/US bonds 40), gold & SCV doing much better.

Sounds like you’re the one with a recency bias is you’re drawing conclusions from two days of trading.

[Dottie57]

Two days is meaningless - we could be back to all-time highs next week.

+1

[rockstar]

Not a a fan of the last two days. But I expected a pull back way before now. It's feels like we had two pull backs combined for this one.

And all of the great economic news didn't help the long end of the bond market either.

[firebirdparts]

Since the S&P rejected Tesla, it's going to be a very long time waiting for Tuesday for all the Tesla traders. that puts a bit of a downdraft on the whole Nasdaq I think. I guess, though, the Tesla inclusion squeeze has to recur every quarter now for the rest of our lives until they get in. That may cause them to reconsider after it happens 2 or 3 more times.

[ImUrHuckleberry]

Not a a fan of the last two days. But I expected a pull back way before now. It's feels like we had two pull backs combined for this one.

And all of the great economic news didn't help the long end of the bond market either.

What do you expect going forward?

[TravelforFun]

I experienced the biggest one-day loss ever yesterday and the loss continued today but I'm holding on to my tech funds and stocks which include TSLA, AMZN, AAPL, and GOOGL. I hope my 25% stop loss doesn't kick in on any of these stocks.

TravelforFum

[rockstar]

Not a a fan of the last two days. But I expected a pull back way before now. It's feels like we had two pull backs combined for this one.

And all of the great economic news didn't help the long end of the bond market either.

What do you expect going forward?

No idea. Even with the pull back, my return on my QQQ fund easily surpasses my return on my VOO fund. Of course, my latest purchases are in the red. It's really hard to know how much to pay for something in these irrational times. I try to buy every month. Some months are obviously better than others.

What will unemployment look like at the end of this month?

[Alchemist]

Embarrassing disaster for the recency bias people (US megacap 60/US bonds 40), gold & SCV doing much better.

Sounds like you’re the one with a recency bias is you’re drawing conclusions from two days of trading.

No kidding.

The S&P500 has CRASHED!!!!111oneone

All the way back to the deep, dark lows of *checks notes*.....August 24th.

[Candor]

Embarrassing disaster for the recency bias people (US megacap 60/US bonds 40), gold & SCV doing much better.

What's embarrassing is that you think this is a disaster.

[DaMama]

Yesterday was more fun.

Cognitive reframe 'til free-fall is fun-fall. Have you never been on a water slide when you were a kid? Around where I live, there used to be a place called Action Park. From Wikipedia:

Action Park's popularity went hand-in-hand with a reputation for poorly designed rides, under-trained and under-aged staff, intoxicated guests and staff, and a consequently poor safety record. At least six people are known to have died as a result of accidents on rides at the park, and it was given nicknames such as "Traction Park", "Accident Park", and "Class Action Park".

#my childhood

I, too, survived "Traction Park"! There's a new documentary out about it. https://www.youtube.com/watch?v=mqg48h_uKYM

[Robot Monster]

Yesterday was more fun.

Cognitive reframe 'til free-fall is fun-fall. Have you never been on a water slide when you were a kid? Around where I live, there used to be a place called Action Park. From Wikipedia:

Action Park's popularity went hand-in-hand with a reputation for poorly designed rides, under-trained and under-aged staff, intoxicated guests and staff, and a consequently poor safety record. At least six people are known to have died as a result of accidents on rides at the park, and it was given nicknames such as "Traction Park", "Accident Park", and "Class Action Park".

#my childhood

I, too, survived "Traction Park"! There's a new documentary out about it. https://www.youtube.com/watch?v=mqg48h_uKYM

Had no idea. Thanks!!

[occambogle]

On the basis of always being wrong in predictions, I think this could be the thread for today.... very much hoping to be proved wrong again, but it's not looking rosy out there at the moment with most indices down.

[lostdog]

On the basis of always being wrong in predictions, I think this could be the thread for today.... very much hoping to be proved wrong again, but it's not looking rosy out there at the moment with most indices down.

Hold on tight!

[Stinky]

On the basis of always being wrong in predictions, I think this could be the thread for today.... very much hoping to be proved wrong again, but it's not looking rosy out there at the moment with most indices down.

I hope that your record for inaccurate predictions remains unbroken today.

[Ryzen]

Those that hold the index don't really have a reason to panic. Tech had been outperforming the broad indexes as a whole, now it seems like tech is going down quicker than the index as a whole. It's easy to have FOMO about tech in the good times, but holding the market (which is weighted towards tech anyways) seems like the best option.

[lostdog]

Will the short term QQQ buyers from the soaring thread sell this week?

[Sufferlandrian]

"The stock market is a giant distraction to the business of investing." - Jack Bogle

[TheoLeo]

Looks like a big down day again. I am relieved and can´t wait for the next paycheck.

[alfaspider]

I almost did my mega backdoor Roth conversion from the last quarter this week. Looks like my laziness was rewarded

[atdharris]

I don't see much coming from this sell-off as the fundamental story has not changed. Tech is going to continue to be the market leaders, especially as we move into the fall with colder weather and heightened covid-19 risks. We aren't going to suddenly be back to normal come October.

[HalfMillionaire]

Here I am moving my allegiances from the Soaring to the Free Fall!

It is amazing how much I do not panic with market movements anymore. My two instant urges in response to market movement is to 1) check the soaring / free fall thread (as applicable) 2) Do my quick re-balance to extract whatever value I can from market movement.

Let the free fall continue! I have at 20-25 years of accumulation ahead of me. I can do with a good free fall.

PS> My super confident posts about crossing two commas are now mocking me. Mr Market gives and Mr Market takes away.

[HalfMillionaire]

I don't see much coming from this sell-off as the fundamental story has not changed. Tech is going to continue to be the market leaders, especially as we move into the fall with colder weather and heightened covid-19 risks. We aren't going to suddenly be back to normal come October.

Well - there is a point to be made that market was over-valued so it is now reverting to the mean. It might even (as it typically does) overshoot on the down side - a good opportunity for patient accumulators.

US Stocks were looking quite expensive compared to Internationals - so this also might be getting back into balance. (This is also wishful thinking as I am sitting on a 50% International allocation - and not budging from that come hell or high water or Telsa reaching the sky)

[lostdog]

Here I am moving my allegiances from the Soaring to the Free Fall!

It is amazing how much I do not panic with market movements anymore. My two instant urges in response to market movement is to 1) check the soaring / free fall thread (as applicable) 2) Do my quick re-balance to extract whatever value I can from market movement.

Let the free fall continue! I have at 20-25 years of accumulation ahead of me. I can do with a good free fall.

PS> My super confident posts about crossing two commas are now mocking me. Mr Market gives and Mr Market takes away.

It will be a give and take for awhile but eventually you'll be back in the 2 comma club for sure.

[poker27]

If this continues, I might be able to buy some equities instead of bonds. The run up has me putting new $ into bonds to keep my AA

[atdharris]

I don't see much coming from this sell-off as the fundamental story has not changed. Tech is going to continue to be the market leaders, especially as we move into the fall with colder weather and heightened covid-19 risks. We aren't going to suddenly be back to normal come October.

Well - there is a point to be made that market was over-valued so it is now reverting to the mean. It might even (as it typically does) overshoot on the down side - a good opportunity for patient accumulators.

US Stocks were looking quite expensive compared to Internationals - so this also might be getting back into balance. (This is also wishful thinking as I am sitting on a 50% International allocation - and not budging from that come hell or high water or Telsa reaching the sky)

I've been sitting on international as well for years. I'll believe they will perform well when I see it - but I am sticking with them.

[H-Town]

Not a a fan of the last two days. But I expected a pull back way before now. It's feels like we had two pull backs combined for this one.

And all of the great economic news didn't help the long end of the bond market either.

It gonna get worse. Way worse. Way way worse.

that free fall thread is back and well.