3 Replies Latest reply on May 18, 2014 1:30 PM by BoBraxton

    question asked by mathematical offspring

    BoBraxton

      Long before I learned any level of confidence by actually investing our math son asked me when I thought the Dow Jones would reach the number of the current year. He was born in 1971. Now it is about time for that same question except for the Standard & Poors Index 500 number which has reached the year my grandfather was age 10. He was born 1887. These are interesting questions to me, probably because I did not think of them myself. It was a child who asked me.

      "A stock market bottom forms when each

      ... indicator reverses and crosses through

      its signal lines. When the Slow Stochastic rises through

      the 20 level [that is] one signal of a stock market bottom.

      The MACD climbing through its 9-month moving average

      is another. The RSI above 50 is another signal to follow

      for an end to a bear market. Finally, when the price

      crosses up through the 24-month moving average,

      [that is] another signal of end of the bear market.

      In early May 2010, the market pulled back as it

      [was testing] the breakout through the 24-month exponential moving average."

      That was four years ago, less than one year into my "good" retirement.

      Watching is, for me, fascinating. The numbers, unlike the money values, are real.

        • Re: question asked by mathematical offspring
          MyR Community Manager

          BoBraxton, thank you for creating a new discussion thread! We appreciate and enjoy your participation in the MyRetirement online community and look forward to your future contributions.

          • Re: question asked by mathematical offspring
            yanushkevich

            Interesting thought, but it needs to be put in the correct perspective.  I remember the S&P500 at around 150, and slowly saw it climb a quarter of a point at a time until it reached around 300.  Thereafter, allowing for some drastic ups and downs such as 1987, 2003, 2008, the norm went to several points increase/decreases for the same index.  Last week the S&P was down around 22 points, which means that it is easier for it to climb 100 or so points and reach 2000, than it was for the same index to move beyond  150 and shoot for 172, again a 22 point difference.

             

            The reason I bring this up, is that indices such as the Dow Jones, NASDAQ, and S&P500 have to be taken with a grain of salt.  What we need is an Index that quantifies the health of the Market, good times and bad times, so that we can place Market gains and losses in the proper perspective.  Unfortunately this will not happen, people resist change.

             

            My solution has been then, to look at my own portfolio, which makes this very personal, and calculate how much a one point difference in the S&P500 makes.  Strangely enough, this number has been fairly constant throughout the years.  That truth has been useful for me, it may not be for others, because my portfolio is still 100% Stock (CREF). 

              • Re: question asked by mathematical offspring
                BoBraxton

                I concur with the very personal. Yes, perspective is crucial. Also, movements up and down are also expressed as tenths of a percent and hundredths of a percent. Maybe everybody does not know that a drop of 0.5% followed by a drop of 0.5% and then an increase of 1.0% - do not balance out. Two decreases - first one is most, the next one is a little less (absolute money) and the increase even though the percentages would seem to cancel each other out, the one percent is OF something that has already been decreased two times and therefore is Not equivalent. It is less. Likewise, when the index declines 30% in a free fall - or lets say goes down 40% (thus 3/5 of its original) and then increaseds 40% - the result is substantially lower than the starting point. I do the tracking five days a week - Tuesday for what happened Monday, Saturday for what happened Friday. However, in many cases my comparison is year-to-date (to the end of 2013) or the one year ago (moving 12 months). Then I mostly ignore (other than noticing and paying attention) because it is not for me a trigger to any changes - regardless.