August 9, 2011
Should You Buy Today For A Bounce Tomorrow?
Should You Buy Today For A Bounce Tomorrow?
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Comments
But doesn't this table only work in hindsight? For instance, if yesterday was the biggest drop to date, today can possibly be bigger.
Well then they would both be on the list. Like 19 and 20 November 2008 are both on there.
Since this is movement of an index (a form of average), it masks the movement of individual shares. A simplistic example: to get and average bounce back of (say) 5%, some individual shares might bounce 10% while others stay flat. It would be much more instructive to see which types of shares bounced back toe most to give the overall bounce. eg is it desirable companies that value investors have sought for a while that now come into the buy range then recover quickly. As a value investor, I would like to think so but an objective analysis would be most interesting. Happy hunting to all.
Interesting - sort of. But what's the point? I don't understand why a big 1 day fall is more important than a big 1 week fall, or a big fall in a month. Frankly, if last week my shares rose 10%, rising about 2% per day, and yesterday they fall 5% - well that's a good week isn't it?
Perhaps of more interest is th emarket position +1 wk, +4 wks etc after the market reached it's trough. After all, a big 1 day fall might be masking a much bigger slow motion train wreck.
The one-month results are distorted by 2008. See how 7 of the top 20 falls occurred in the second half of 2008. So the earlier falls in 2008 show poor one-month returns because they were followed by other big down days. Four of the five 4-week negative results occurred in 2008. If not for 2008, 4-week results would look more like 1-day results. Not sure what you do with that information, because who knows when the 'next 2008' is due. But I just note its distorting effect.
its an interesting graph and i am sure lots of people will do something with a bounce... but with quality who needs to bounce...even my limited intelligence can see that... with todays prices some stocks were just cheap... we won't bounce with what we bought, but if you truly think there is something within the fund that should be bounced then for our investment we say bounce away...
10/19/87 1 week later +1.26%
10/26/87 (1 week after 10/19/87) -8.28%
Have I misunderstood or is there a data error here?
The market was at 224.84 after the fall on 19-oct-87. The one day fall was 20.47 on the 19th. Had you bought the market on that day (@224.84) the gain was 1.26% for the following week even though the market had a one day fall of 8.28% on the 26th-oct-87 to 227.67. Gain (227-224)/224 for the week holding period. IE The market must have gone up for the week before retracing on the 7th day (5th trading day).
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