eResearch Blog: Volatility

WEEKLY COMMENT for August 7, 2007

When the market is gyrating all over the place, sometimes it is best just to sit on the sidelines. We have been warning for weeks that a downturn was coming and that it would be prudent to “go to cash” and “take some profits off the table”.

In the past two weeks, the S&P/TSX is down 7.0%. Both Energy and Health were off 7.2%; Telecommunications fell 6.9%; Materials (mines and metals) declined 6.6%; and Financials were off 6.4%.

In comparison, the last two weeks of trading saw the DJIA fall 4.8%, and both the S&P 500 and the NASDAQ 6.6%.

The Dow Jones 30 Industrials exhibited considerable volatility. Over the last ten trading days, each day saw the index swing, from its highest to its lowest, more than 200 points, and 8 of the 10 trading days had closings (3 up and 5 down) that exceeded 100 points.

Expect further volatility to come. The market needs to find a bottom and build a base before it can be expected to resume upwards. This will take some time.