Browsed by
Tag: MeltUp

Why This Stock Market Melt-Up Is So Hard to Handle

Why This Stock Market Melt-Up Is So Hard to Handle

The stock market continued to ascend on Monday, with seemingly no obstacles in sight to keep major market benchmarks from challenging new record highs soon. Hope for help from Washington beat down any worries about the coronavirus pandemic, and high-flying tech stocks led the Nasdaq Composite to another huge gain. Rises for the Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 (SNPINDEX: ^GSPC) were a bit more muted but still added to their recent rallies.

Today’s stock market

Index

Percentage Change

Point Change

Dow

0.88%

251

S&P 500

1.64%

57

Nasdaq Composite

2.56%

296

Data source: Yahoo! Finance.

When the stock market crashes, it’s easy to understand why so many investors get uncomfortable. Yet in many ways, when the market climbs precipitously — as we’ve seen over the past several days — it can be even harder for investors to handle. That might not seem to make sense, and it wouldn’t if everyone followed one simple principle. But market melt-ups reveal the shortcomings of one of the biggest mistakes that many investors make.

Tons of market volatility

We’ve seen huge ups and huge downs throughout 2020, and even though there hasn’t been a market crash the size of what we saw in February and March, it’s still been staggering to see the pace at which market sentiment can turn. Throughout much of the summer, markets gained ground, with many indexes punching through old highs at the beginning of September.

^DJI Chart

^DJI data by YCharts.

That was followed by an abrupt downturn that took most of September. Yet after that correction, markets have moved higher quickly and furiously, with major benchmarks seeing gains of as much as 12% from their lows just a couple of weeks ago. Volatile stocks such as Tesla (NASDAQ: TSLA) have seen even more dramatic moves in

Read the rest