Investing

The Stock Market Joke of October: What Sell-Off?

The end of September brought a sell-off in stocks that went well into October. The first half of October was a month in which many investors started to wonder if the five-and-a-half-year-old bull market was finally coming to an end. It turns out the drop was just yet another major buying opportunity and head fake that pulled the weaker strings out of the market. In just over two weeks, the Dow Jones Industrial Average (DJIA) and S&P 500 have averaged gains of about 10% from the selling panic.

Dare we ask, what sell-off?

It now seems almost crazy to think that the investment community was beginning to get worried again. But an earnings season scare went away rather quickly, the Ebola scare did not escalate and there was a concern that the weakness in Europe and China was going to make the U.S. economic readings look worse and worse for the rest of 2014. Strangely enough, that did not happen, and now Japan expanded its quantitative easing efforts — driving stocks back up to or close to all-time highs again.

The Federal Reserve has even now ended its asset purchases, marking the end of quantitative easing for the United States. There is a hope that Europe will embark on a quantitative easing plan of its own.

Sure, there are some things that went wrong during October. 24/7 Wall St. identified 8 stocks that we think destroyed investor prospects for the long-term. They were simply that bad. So, how silly does the sell-off look now that stocks recovered?

The DJIA previously peaked at 17,350.64 on September 19, yet fell to 15,855.12 on October 15, a drop of 8.6% from peak to trough. The DJIA only went under 16,000 for two days and rose to nearly 17,400 earlier on Friday — a gain of 9.7% from the trough in just over two weeks. The SPDR Dow Jones Industrial Average ETF (NYSEMKT: DIA) participated in this move almost step by step.

The S&P 500 peaked at 2,019.26 on September 19, yet hit a low of 1,820.66 on October 15, for a drop of 9.8% from peak to trough. That drop below 1,850 lasted only two days, and the S&P hit a high of 2,017.45 on Friday — a gain of 10.8% from trough to recent peak. The SPDR S&P 500 ETF (NYSEMKT: SPY) tracked these moves almost step by step as well.

As of Friday, the 10-year Treasury note was back up to a 2.34% yield. On October 15, the scare was reaching a peak to the point that the Treasury yield was down to just under 1.90% again. That is a scare level when you consider that the 10-year yield was 2.62% back on September 18.

Not everyone is a winner in Japan’s QE efforts — gold and silver were crushed!

So, is it a joke to ask what happened to the sell-off? It depends on whom you ask, but it will be hard to find the bears after the past two weeks. They went back into hibernation.

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