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Market Watch: This plunge looks a lot like the ones that rocked stocks in 1929, 1987 and 2008 – and if it keeps tracking, look out!
Article by Shawn Langlois in The Wall Street Journal Market Watch
The takeaway from this Longview Economics visual (our “chart of the day”) seems to be: Don’t get sucked into the bounces. If history is any indication, a true stock market rout doesn’t happen in a straight line.
Choppy trading is part of the process. Big up days tend to follow big down days.
As you can see, fluctuations in the ballpark of what we’ve seen this week — the Dow Jones Industrial Average has seen a 2,000-point drop, a 1,000-point rebound and another 1,000-point reversal — aren’t completely out of the ordinary when looking through the lens of prior ugly markets.
“A bottom won’t be reached until investors lose all hope,”Longview wrote.
Of course, with the coronavirus spread and chaos in the oil pits rattling investors, there doesn’t seem to be much hope in the market on Wednesday. At last check, blue chips were down more than 1,200 points and both the Nasdaq Composite and S&P 500 index were off 4% each.
If the trend holds, however, another sizeable rebound could be in order. Just keep in mind that selling the bounce has trumped buying the dip during those previous periods of market upheaval.
To read this article in Market Watch in full and view the relating historical chart, click here.
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