What Goes Down … Dow Up 10 Percent
The Dow shot up 889.35 points on Tuesday, a welcome respite from Wall Street’s month of plunges. Things could still get a lot worse: While some buyers snapped up what looked like bargain stocks, others said they expected a major drop before things get better.
Wait, before you go…
Wall Street Journal:
Heading into the end of October, the Dow has plunged 17%, on track to register as the worst month in its history. But that plunge has whetted bargain hunters’ appetites and forced some money managers whose funds are required to hold a certain percentage of money in stocks to come back into the market as the time approaches to mail month-end statements.
Despite Tuesday’s gains, some participants remain concerned that trading volume has been light, making it difficult to gauge investors’ level of conviction that the gains can continue. Exchange-only volume at the New York Stock Exchange on Tuesday struggled to reach the month-to-date average of 1.7 billion shares.
Although it didn’t happen Tuesday, the stock market lately has often been plagued by forced selling among hedge-funds and other deep-pocket players, who have to raise cash to cover margin calls as the market goes down. While such activity has often produced avalanches of selling lately, some veteran investors are still looking for a one-time market plunge, accompanied by big volume, to confirm that the forced selling has truly run its course, paving the way for a more sustained rally.
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