Dow down 1000 points as USA stock market plunges again

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Investors often buy gold when they're anxious about market volatility, but they aren't doing that now.

The Dow dropped 1,032 points, or 4.1 percent, to 23,860. Those losses had wiped out stocks' gains since the beginning of 2018.

Some analysts stressed that the economy remains strong, noting that the markets are fickle and have always been vulnerable to fears of what is to come. In typical and predictable fashion, Wall Street keeps its blinders on. If you're a long-term investor and this remains no worse than a correction, "you don't lose if you don't sell". The result is waves of selling.

An improving outlook internationally is adding to pressure on global fixed income markets.

At 10:09 a.m. ET, the Dow Jones Industrial Average was up 228.25 points, or 0.92 percent, at 25,141.02. Eight stocks fell for every one that rose on the New York Stock Exchange, and 490 of the companies in the S&P 500 took losses. The Dow had a more than 1,100-point difference between its high and low on Tuesday.

While days like Black Monday have occurred throughout history, they're rare and unpredictable.

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Traders often add the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI) to identify the direction of a trend. The RSI, or Relative Strength Index, is a commonly used technical momentum indicator that compares price movement over time.

Even with Friday's gains, the benchmark S&P 500 fell 5.2 percent for the week, its biggest weekly percentage drop since January 2016, as volatility spiked back up.

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"The market had gotten way ahead of itself", said Nancy Tengler, chief investment officer of Heartland Financial. If bond yields start to rise, investors will want to take some of their money out of stocks and put it into safer bonds.

But don't mistake being lucky for being smart.

With a plunge of over 1,100 points, the state of the markets led to inflation fears with some experts warning that computer trading had led to a flash crash after a steep slide of more than 1,500 points at one stage.

While decline on a stock market can point towards a coming recession, they are really measuring different things - recession simply refers to two consecutive quarters of GDP decline.

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Wild swings over the past week have left stocks in the red for the year. That's a long way from bubble territory. There are risks from moving wholesale from stocks to bonds. The yield on the 10-year Treasury note rose to 2.75 percent from 2.71 percent. The Dow has entered a correction, down 10% from its record high just two weeks ago.

The global sell-off began last week after a solid USA jobs report fuelled expectations that the Federal Reserve would need to raise interest rates faster than expected, because of the strength of the economy. I don't think so.

The chaotic week on global markets also comes as several markets around the world sit on, or near record highs.

A significant portion of market gains has tended to occur during short periods of time.

Stocks had been rising steadily since the election in part because the economy is so strong. Investors who try to time the markets generally lose, and plenty of data proves it. That can help you benefit during times of volatility because when you regularly invest a set amount, you'll buy at varying price levels, and your purchase prices may average out to be lower than if you invested all at once. That's well short of an official "bear market", which is defined as a market drop of 20% or more.

With Wall Street's quarterly earnings season more than half-way through, 78.3 percent of the S&P 500 companies that have reported so afar have beaten profit expectations, above the 72 percent beat-rate in the past four quarters.

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And remember, panic is not your friend.

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