On Monday, we saw a sell-off of more than 1 percent across major U.S. markets. Europe and Asia followed suit the next day. Judging by my e-mails I received, this was it, the beginning of the end, and “you unrepentant bulls are finally going to get what you deserved.”

Except not quite yet. Tuesday and yesterday markets put in back-to-back rallies that erased the losses, and then some.

We have been discussing related themes — hated rallies, the Fed & quantitative easing, and under-invested managers — for quite some time. But rather than rely on what can only be described as unreliable anecdotal evidence, let’s look into the data on corrections and crashes.

My colleague Josh Brown looked at the history of market crashes in the U.S. He notes that the Dow Jones Industrial Average has had 11 crashes of 35 percent or worse since it was formed in 1896 . . .

Continues here

Category: Apprenticed Investor, Markets, Trading

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4 Responses to “Crashes, Corrections & Sentiment”

  1. Jonathan says:

    I may be old-fashioned, but to me a market crash is a 5% or more drop in a single day.

    When markets shave off 1 or 2%, that is just an active day in my opinion.

    2008 is an interesting study and possible contradiction to my earlier statement on this, since it had 4 major drops (roughly 7% each) AND 2 major gains (roughly 11% each).

  2. EdMcGon says:

    You mentioned you added some preferred stocks. I’ve been looking for a good dividend-paying preferred. Any suggestions?