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Yesterday’s Stock Market Plunge Saw Indiscriminate Dumping of Stocks

Courtesy of Pam Martens

Dow Versus Nasdaq, Five-Day Chart Ending February 8, 2018

Dow Jones Industrial Average (Green) Vs Nasdaq (Orange), Five Days Ending February 8, 2018

Dow Jones Industrial Average Chart, February 8, 2018

Dow Jones Industrial Average (Green) Versus Nasdaq (Orange), February 8, 2018

Dow Jones Industrial Average Versus Nasdaq, March 30, 2000 Through December 31, 2003

Dow Jones Industrial Average Versus Nasdaq, March 30, 2000 Through December 30, 2003

By Pam Martens and Russ Martens

The Dow Jones Industrial Average (Dow) has now had two days of losses of more than 1,000 points in the last four trading sessions: Monday and yesterday. The Dow consists of some of the oldest companies in America and, to a large degree, what are regarded as the safest stocks to hold by investors because of their liquidity, large capitalization and steady dividends.

The Nasdaq, on the other hand, consists primarily of much younger companies, many in the roller-coaster technology field, and far shorter histories of paying dividends.

Typically, in a market panic, one would expect the Nasdaq to show a deeper dive than the Dow. But as the top chart above indicates, on Monday and Tuesday it was actually the Dow that saw a deeper selloff. Then yesterday, Thursday, February 8, the two widely disparate markets traded in almost complete lockstep. (See second chart above.) Why would a far riskier market trade in lockstep with the far safer Dow during a market panic? Surely memories are not so short that they can’t recall how the Nasdaq fared versus the Dow in the dot.com bust that began in March 2000. (See third chart above.)
 
Logic suggests that what we saw yesterday was the indiscriminate, wholesale dumping of stock portfolios by traders desperate to raise cash any way they could. That then raises the next question: is there something out there that regulators and the public can’t see that is fueling a mass liquidation of stocks by traders who made a wrong-way bet on volatility, interest rates or some other trading strategy.

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