Something Is Happening with the Dow, and It Is Not Pretty
The Dow Jones closed Tuesday with its ninth consecutive day of losses. The last time the stock market saw that kind of losing streak was back in February of 1978.
That spells disaster for the Dow Jones index, which is down by 0.61% at the time of this writing, before Wednesday trading opens. Over the last five days of trading, the Dow has lost nearly 1,000 points.
[[DJIA-graph]]
Why Is the Dow Staying Down?
The Dow, like the rest of the stock market, climbed fast and high over a period of several weeks following the US election results. The market was focused on all of the positive aspects of Donald Trump’s upcoming presidency, and that led to rampant market investments.
Now that many of those stocks have done very well recently, tremendous selling pressure has accumulated, and we are seeing a correction take place. This does not necessarily spell major trouble for the market in the coming weeks and months, but it does show that some of the incredibly high stock prices of recent weeks were not based on solid factors and actual economic improvement. Instead, they were based on economic potential.
There is concern now that the Federal Reserve will announce today that no interest rate cut is taking place or that the cut will be very minor. That has led to further decline for today, and we will have to wait and see if the market declines further after the Wednesday announcement.
The Stock Market Moves Forward
Steep gains and profit taking have been the story of the stock market in recent weeks, but much of that is coming to a close now, and we have entered a period of correction.
The good news is that the stock market has not lost all of those gains it made recently. The last three months has resulted in a gain of approximately 2,000 points for the Dow Jones. The Nasdaq Composite has gained around 2,500 points in that time, and the S&P 500 climbed by about 400 points in the last three months.
Even though we have seen losses for the market indices recently, many of the gains remain, creating a stronger and higher stock market than what we saw before the election. The majority of those gains happened after the election, and there is every reason to suspect that the market will continue to climb very high after Donald Trump takes office.
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