Market Returns to Date

Jan 18, 2008: 10:35 AM CST

We have seen a true “correction” via a 10% decline in price in the 13 trading days of 2008 so far, not including the peak to current decline from the October/November 2007 highs.

It’s always good to know where the markets are for the year, because so many intraday or swing traders can miss this aspect of analysis if they get too preoccupied with viewing many stocks in their research.

For 2008, the NASDAQ has fallen 11.5%, Russell 2000 also 11.16%, but the Dow Jones and S&P 500 (not geared to overly volatile or small-cap stocks) have only declined 8.3% and 9.2% respectively.

Typically, we can expect this sort of pattern because the NASDAQ stocks are overwhelmingly comprised of ‘risky’ or volatile technology-style stocks that move up and down faster than the broader markets.

The Russell 2000 is comprised mainly of smaller capitalization stocks which also tend to be more volatile.

Traders/investors purchase such volatile companies when they expect long-term upside in the market (so they can ‘beat’ the market) and bail out of these stocks in droves when they expect longer term weakness in the broader market (so they don’t lose money faster).

Keep in mind that the Dow Jones is comprised of 30 stocks only, but they are larger capitalized “Blue Chip” companies that have been around for decades and are generally more stable and defensive.

The S&P 500 is comprised of 500 stocks that are expected to reflect the broader market in terms of capitalization, industry, sector, etc.

1 Comment

One Response to “Market Returns to Date”

  1. Aaron Wakling Says:

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Aaron Wakling