1/21/2005

The Stock Market Is Falling Again

"The Dow Jones industrial average fell 68.50 to 10,47147" stated the Seattle Time's Michael J. Martinez. This is something that no investor wants to here. The Stock Market has been falling for the past several months. In the article Nervous investors push stocks lower http://seattletimes.nwsource.com/html/businesstechnology/2002156407_stox21.html, Martinez tells of how there are many companies that have not meet their projected earnings for the fourth quarter and are now lowering there projected earnings for this next quarter.

Martinez quotes Rod Smyth, from Wachovia Securities the chief investment strategist saying, "We're in a correction right now from the rise we saw since mid-October. It's perfectly natural for markets to behave this way." But what I want to know is this really normal? Could the online traders have an effect on the way the market fluctuates with extreme ups and down? I think the ups and downs come from the ability of anyone to buy and sell so easily.

10 comments:

BOB said...

While the stock market may be falling a little bit, the smart investor would do well to realize that there is still a lot of money to be made on the market. Do not panic by a falling market, because they never announce when the market is doing well.

Luise said...

The problem with the constant "the market is falling" is that there are always ups and downs. No one makes or loses money until they sell the stock they own. I have shares of stock and I have watched my statements very closely over the past couple of years and it has never been one costant up. It gose up some months and it does well for a while and then I'll lose a couple hundred dollars. In the end it always gose back up or at lest that's how it appears to me.

Dale said...

Most of the investors are showing interest in markets overseas, because of the falling dollar. Many Americans are searching for less risky investments even though the past year was rewarding risk. Some investors are also worried about higher interest rates, as a result they are encouraged to be more conservative.

homer said...

The cyclical stocks are where fortunes can be made. All one needs to do is find a solid, thriving company that has this trait and buy low (the share value will go back up)and sell high.

salty said...

The ups and downs do not come from the ability for online traders to buy and sell so easily. Think of why they are buying and why they are selling. Maybe the stock is expected to report a better than expected earnings per share. Or, they could sell due to the fact that the companies long time CEO died in a plane crash over the SUU business building after reading this blog. Stocks fluctaute because of internal and external facors that effects them, not because it is so easy to buy and sell.

Drake said...

The key here, don't put all your eggs in one basket. The market fluctuates on a reagular basis it always has it always will. The key to being succeessful with these eratic market ups and downs is to diversify, and spread out your risk. The ability of anyone to buy an sell is what makes the market a viable place of growth. If the market was limited. I think the effects could be economically devastating.

Dr. Tufte said...

-1 for spelling mistakes on Luise's and Drake's comment (waived).

I think the stock market going up and down is perfectly normal.

The appropriate way to measure whether there is more volatility is with the percentage change in price rather than the actual change of 68.50. I haven't checked this against past data, but my off-the-cuff estimate is that this sort of volatility is normal.

Having said that, what really increases volatility is new traders entering the market. As we saw in the Aplia experiment, the volatility is reduced as players became more comfortable with where their reservation value was relative to the equilibrium. So, periods like 1998-2000, when a lot of new people started trading, tend to be more volatile.

Ralph said...

Just as Rod Smyth stated, the market is in correction from a high point. I like to think of the market as in phases, the market will go up, and the market will go down. Since the market opened, some stocks have change dramatically, and others slowly. Either up or down the market will be in a trend for a certain time interval. The market may seem to be erratic at first, but there are trends in the chaos, and one in particular that is important. Look at he long-term trend of the market, it has been going up, but, if you look closer, it is made of many dips and rises. http://university.smartmoney.com/departments/investing101/stocks/index.cfm?story=intro

Don't be so worried if the dow is down today, you may have lost some money. Historically speaking, if your portfolio is diversified, it should come back. Think more in the long-term, you will definitely have less stress, and your money should grow.

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taylor1940 said...

Nice article that informs us about the down fall of stock market.
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Taylor

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