Today’s market gain of 11.4% for DJIA was of historic proportions, logging the best gain since 1933.
Ironically, that record DJIA (NYSEARCA:DIA) gain of 15.3% was achieved in the month of March and on the Ides of March, 3/15/1933 to be precise. Take a look at the image above from page 164 of the Stock Trader’s Almanac 2020 and you will a see a few other gains of similar magnitude from other historic market times: 1929, 1931, 1932, 1987 and 2008.
Hat tip to our good friend J.C. Parets of All Star Charts who “Caught [himself] looking at this page today in [his] Almanac.” He put a similar image as the one above on his Twitter feed and tagged me. He accurately points out that “This sort of behavior is not characteristic of a healthy environment for stocks.”
Moves of this magnitude in either direction have become a rather regular occurrence these past few weeks. One could argue that market volatility (NYSEARCA:VXX) has been on the rise since the repeal of the Glass–Steagall Act of 1932 which separated commercial banking from investment banking. Electronic trading has accelerated the increase and frequency of large daily swings.
To wit: We have never before experienced the frequency and magnitude of the daily market moves we’ve had since the last week of February 2020. Over the past 22 trading days starting on February 24 DJIA has logged 6 gains of 3% or more, 11 losses of -3% or more; 6 gains of 4% or more, 7 losses of -4% or more; and 4 gains of 5% or more, 5 losses of -5% or more. This has never occurred before.
In order to put the current market into some historical perspective we compiled the table below of previous times DJIA has logged 5 days with gains of 3% or more and 5 days with losses of -3% or more over 20 trading days. It’s not a long list: November-December 2008, September 1932, October 1931 and November-December 1929. Not the best company to keep.
So while today’s gain is welcome and encouraging, volatility remains high and daily moves of this frequency and magnitude in both directions have occurred during major market declines. Record gains like today are not necessarily an indication that we have seen the low. It is constructive, but not a foregone conclusion. Stay safe and be well out there.