What's Happening With The STOCK MARKET?

The government says that we are beginning to recover from this recession-so why the wild ride on Wall Street? The DJA has been swinging wildly-down 150 Tuesday, up 150 Wed., down again 200 points yesterday. Whay such violent swings? Are we heading back into recesion-or is the market telling us that a major war in the Middle East is in the offing?
Or is it because they fired Louis Rukeyser??

The stock market is fluctuating. It will continue to do this.

A 200 point change in the Dow Jones is about 1.8 percent when the Dow is at 11000.

Contrast that with the fluctutations in the price of gasoline right now.

The stock market rises & falls on the wings of dreams.

Can someone please tell me what the hell handy is talking about?

The real questions are:[ul][li]Will the size of the fluctuations get bigger and bigger or will someone figure out how to dampen them down to near-zero?[/li]
If the flux-sizes keep increasing, where is the blow-out region?[/ul]

If you have the time, check out a book called “A Random Walk Down Wall Street” by Burton Malkiel. It’s a great book, and it explains the ups and downs of the stock market very well.

Basically, there is a lot of randomness in the stock market. Yes, the market averages react to world events, but there is still a great deal of randomness. So perhaps there are explanations for the recent turbulence, and perhaps not.

The recent dip seems to be a result of 2 things:

  • general realization that the recovery is going to be slow, so serious profit growth is further away than people thought
  • some bad quarterly earnings reports by specific companies

My personal hunch is that the US stock market is still over-valued by 10-20% and even a stronger economic recovery will not boost share prices much in the next year or so. But what do I know?:slight_smile:

I just saw a terrific PBS video about some math guys who made a math model of the fluctuations of the market & were able to predict with this formula, after tons of refining it, what would happen in the market. They then used it to make a ton of money. This was a 90’s thing. It was great to see how some guys could make a model of the market that worked. I forgot the name of it but we have the video in the store.

BTW, eventually after a year or so they hit a fluctuation in the market that their model couldn’t account for. Woops.