Dow closed below 17,000 yesterday....

[TheInsuranceMan]

Well, I've been doing some reading on a couple different boards that I follow, and most of them are saying that a close under 17k yesterday is a HUGE bear sign in the DOW.  What are people's opinions of this?  Obviously, we could trade sideways, or we could trade down, but I think 17k was a solid resistance level and it was blown through at the close yesterday.

And here we are today, 300 points down again...
What effects does this have on your FI/RE plans?  If this moves us into a long term downward trend, those that are my age (younger, mid twenties), it could allow us to have good buying opportunities in the future.  But for those that are looking to retire in the next 0-3 years, would a decreasing market effect your accounts enough to delay your plans?

[Mississippi Mudstache]

...I think 17k was a solid resistance level and it was blown through at the close yesterday.

Resistance level? It's just a random number that happens to have zeros as the last three digits. Weekly market perturbations have no effect on my life.

[Roothy]

You know that technical analysis is financial phrenology, right?

[Slee_stack]

As most here would suggest, its a much better opportunity to buy today than yesterday.

If there is indeed a bear market ahead and FIRE date is based solely on a Net Worth trigger, a delay will occur.

For me personally, I have circumstances in which my SO has a much larger effect on my FIRE than a potential bear market.  In other words, this has near zero impact to me.

[Due South]

Well there's no turning back as I have just pulled the plug.  Feeling a fair degree of angst - some pretty poor dividend results lately too.  But some relief that I decided to keep nearly two years' worth of expenses in cash !

[EricP]

It did?  That's interesting... I guess.

What does it have to do with my FIRE plans?  Probably nothing.  I'll continue to buy stocks once a month as I always do and eventually it will all go back up.  FI is still many years away so I doubt a run of the mill dip will change anything.

[iamlindoro]

The only problem I have is that I'm not scheduled to buy again for ten days.  Hope it continues to drop, this is awesome!

[BarkyardBQ]

The only problem I have is that I'm not scheduled to buy again for ten days.  Hope it continues to drop, this is awesome!

My problem is that my contributions today will only be half the value of our portfolios current dip. I really like doubling up the dip.

[AZDude]

I would say this would be a reason where if you are close to FIRE, but the market dips like it is, that you could just reduce your workload and wait it out as a semi-retired man.

[TheInsuranceMan]

...I think 17k was a solid resistance level and it was blown through at the close yesterday.

Resistance level? It's just a random number that happens to have zeros as the last three digits. Weekly market perturbations have no effect on my life.

A lot of people would disagree that 17k was just a random number, but you can believe what you want to.

[BarkyardBQ]

...I think 17k was a solid resistance level and it was blown through at the close yesterday.

Resistance level? It's just a random number that happens to have zeros as the last three digits. Weekly market perturbations have no effect on my life.

A lot of people would disagree that 17k was just a random number, but you can believe what you want to.

[EricP]

...I think 17k was a solid resistance level and it was blown through at the close yesterday.

Resistance level? It's just a random number that happens to have zeros as the last three digits. Weekly market perturbations have no effect on my life.

A lot of people would disagree that 17k was just a random number, but you can believe what you want to.

It's just a random number that happens to have three 0s behind it.  It has no special "sticking power."  Traders weren't looking at the DJIA and thinking "Man, I probably shouldn't make this trade because it might drop the Dow below 17k.  That would be catastrophic."

Sorry, that was probably rude, but it's how I feel, I would be interested in why you think 17k has "resistance" anymore than 17,231 or 16,996.

[Slee_stack]

The only problem I have is that I'm not scheduled to buy again for ten days.  Hope it continues to drop, this is awesome!

Yay dollar cost averaging!

Maybe you could slip an extra buy in there inside 10 days?

[TheInsuranceMan]

Guess I should go talk to these guys...
http://forum.mrmoneymustache.com/investor-alley/ready-for-a-correction/

[EricP]

The only problem I have is that I'm not scheduled to buy again for ten days.  Hope it continues to drop, this is awesome!

Yay dollar cost averaging!

Maybe you could slip an extra buy in there inside 10 days?

Isn't dollar cost demonstrably worse then just buying as soon as you have the money available?

[sol]

I expect the crash will accelerate my FI plans.

My account value will drop but the P/E is better, and I'm still adding a fixed amount each week so my buys are effectively buying me a higher P/E today than they were last week.  This can only help.

[Eric]

You know that technical analysis is financial phrenology, right?

I have never heard that stated that way before.  I love it!  But that's probably just because my head is slightly larger on the front left side.

[gReed Smith]

Isn't dollar cost demonstrably worse then just buying as soon as you have the money available?

Yes, if you are risk neutral.  Most of us are not.

[sol]

Isn't dollar cost demonstrably worse then just buying as soon as you have the money available?

Yes, if you are risk neutral.  Most of us are not.

Also, the practical effect of investing your money as soon as you get it is the exact same as dollar cost averaging, for people with regular paychecks.  DCA only underperforms lump sum investing if you're holding back part of your available funds instead of investing them.

Most of us continuously lump sum invest every time we get paid, which is just dollar cost averaging.

[Mississippi Mudstache]

Isn't dollar cost demonstrably worse then just buying as soon as you have the money available?

Yes, if you are risk neutral.  Most of us are not.

Also, the practical effect of investing your money as soon as you get it is the exact same as dollar cost averaging, for people with regular paychecks.  DCA only underperforms lump sum investing if you're holding back part of your available funds instead of investing them.

Most of us continuously lump sum invest every time we get paid, which is just dollar cost averaging.

^What I was thinking.

[regulator]

I keep hearing panic at what amounts to a minor drop.  Has everyone been lulled to sleep by the calm in the last few years?  Historically, a 10% drop AKA correction is roughly an annual event and just a normal, healthy part of market dynamics.

[DollarsAndDissonance]

I have no opinion on whether today is a blip, a correction, or the beginning of a recession, but I was able to harvest just over $3k of losses today for this year's tax returns.  I'm happy with that!

[sol]

I keep hearing panic at what amounts to a minor drop.  Has everyone been lulled to sleep by the calm in the last few years?  Historically, a 10% drop AKA correction is roughly an annual event and just a normal, healthy part of market dynamics.

Yes we're all totally lulled.  There are thousands of investors on this site who have never experienced a negative year, much less a protracted bear.  I predict there will be gnashing of teeth.

Watching your account balances shrink even after you keep adding funds to them is hard, but that's how you score the big gains later on.  Stick it out, people.

[EricP]

I keep hearing panic at what amounts to a minor drop.  Has everyone been lulled to sleep by the calm in the last few years?  Historically, a 10% drop AKA correction is roughly an annual event and just a normal, healthy part of market dynamics.

Yes we're all totally lulled.  They are thousands of investors on this site who have never experienced a negative year, much less a protracted bear.  I predict there will be gnashing of teeth.

Watching your account balances shrink even after you keep adding funds to them is hard, but that's how you score the big gains later on.  Stick it out, people.

The only reason I know about these "drops" is because of people on this blog.  Maybe others will be gnashing their teeth, but when I can't tell you how much is in my TSP account or my IRA today, I don't really think I'm going to be too worried when a real bear hits as I'm just going to keep working my job and putting more money into the market just like I always do.

Post RE it will be a little different as I'll be monitoring it as it will effect my annual spending and a decision to potentially work a part time job, but for now I'm not worried at all.

[forummm]

I keep hearing panic at what amounts to a minor drop.  Has everyone been lulled to sleep by the calm in the last few years?  Historically, a 10% drop AKA correction is roughly an annual event and just a normal, healthy part of market dynamics.

Yes we're all totally lulled.  There are thousands of investors on this site who have never experienced a negative year, much less a protracted bear.  I predict there will be gnashing of teeth.

Watching your account balances shrink even after you keep adding funds to them is hard, but that's how you score the big gains later on.  Stick it out, people.

And be excited! Valuations were too high. And still are. For long term returns, we'll all be a lot richer if the market goes down and stays down while we're still accumulating. That would be bad for retirees heavily in the market. But most of us are still on the saving side.

[Rufus.T.Firefly]

Isn't dollar cost demonstrably worse then just buying as soon as you have the money available?

Yes, if you are risk neutral.  Most of us are not.

Also, the practical effect of investing your money as soon as you get it is the exact same as dollar cost averaging, for people with regular paychecks.  DCA only underperforms lump sum investing if you're holding back part of your available funds instead of investing them.

Most of us continuously lump sum invest every time we get paid, which is just dollar cost averaging.

Lump sum or DCA, whatever floats your boat in my opinion. A lot of great finance minds recommend DCA. But some studies say otherwise. With a lot of financial studies, you can always retroactively "prove" something to be true, but its not always good actionable advice. I think as long as someone is investing for the long-run and keeping costs low, it doesn't really matter that much.

Personally, I get paid in lump sum commissions for my work and feel more comfortable with a DCA strategy than dumping it all into the market on the particular day that I receive a check. Whatever helps you sleep at night is what you should do.

Also, like most others here I am pumped about the recent dip. I recently got paid pretty well and have been hoping for a drop to get a better P/E.

[trailrated]

WHY DID THE STOCK MARKET GO DOWN TODAY?

Why Trade Futures? Diversify your portfolio and maximize capital.
Wall Street Journal: Tensions in Ukraine and the Crimean peninsula
Yahoo Finance: Russians
Fox Business: Obamacare
CNBC: It didn’t sell off at all, it was actually a reverse rally
Forbes: Taxes are too high
Huffington Post: Taxes are too low
Fox News: Gay marriage
Motley Fool: Sign up here to find out!
Bloomberg TV: The opposite of whatever CNBC said.
Quartz: Chinese shadow-banks
FT Alphaville: Chinese derivatives
Washington Times: Fallout from explosive Benghazi revelations
StockTwits: Here’s a chart
USA Today: Let’s take a poll
DealBook: lack of M&A
Zero Hedge: Better question, why would it have gone up?
MSNBC: I’m not sure I’m comfortable with the term “stock market” per se…
Business Insider: Ten reasons, actually (view as single page?)
Financial Times: Please take a moment to register and accept cookies
MarketWatch: 1929
The Reformed Broker: More sellers than buyers
Buzzfeed Business: It’s like that time on Party of Five when Charlie was giving Julia the silent treatment…
Reuters: HFT
Barron’s: Valuations got ahead of themselves
Investors Business Daily: drop in momentum. And record deficits.
History Channel: Ancient Aliens

Stolen from an article back in 2013 http://thereformedbroker.com/2014/03/13/why-did-the-stock-market-sell-off-today/

[fb132]

I kind of had a feeling this year was going to be a down year at the stock market. However I am not worried at all, I just can't wait for September to arrive so I can invest again....hopefully the market will go even lower. The only downside is that my networth will take a hit, but that's a minor problem to have. I prefer buying shares on sale than seing my networth go up.

[Gin1984]

The only problem I have is that I'm not scheduled to buy again for ten days.  Hope it continues to drop, this is awesome!

Hey, me too! 

[regulator]

I keep hearing panic at what amounts to a minor drop.  Has everyone been lulled to sleep by the calm in the last few years?  Historically, a 10% drop AKA correction is roughly an annual event and just a normal, healthy part of market dynamics.

Yes we're all totally lulled.  There are thousands of investors on this site who have never experienced a negative year, much less a protracted bear.  I predict there will be gnashing of teeth.

Watching your account balances shrink even after you keep adding funds to them is hard, but that's how you score the big gains later on.  Stick it out, people.

And be excited! Valuations were too high. And still are. For long term returns, we'll all be a lot richer if the market goes down and stays down while we're still accumulating. That would be bad for retirees heavily in the market. But most of us are still on the saving side.

I am no longer accumulating, so no soup for me.  That said, I am trying to have enough contract work to more or less break even on my expenses for the next several years so a kerfluffle/correction/bear really is of no account.

[sunday]

Ooh, thanks for reminding me I need to buy more now that my fund is on sale!

[Mississippi Mudstache]

Yes we're all totally lulled.  There are thousands of investors on this site who have never experienced a negative year, much less a protracted bear.  I predict there will be gnashing of teeth.

Watching your account balances shrink even after you keep adding funds to them is hard, but that's how you score the big gains later on.  Stick it out, people.

I started investing in earnest in 2011, which saw some steep losses in the latter half of the year. I didn't really start keeping track until the latter part of 2012, and it's been all uphill since then. However, I max out all of my retirement accounts, and will continue to do so. It's fun watching your accounts climb faster than you're actually earning money, much less fun to lose more money in a day than I save in a month. But from an intellectual level I know that the bear markets are where much of my retirement money will actually be made. I don't get too excited either way.

[Catbert]

Time to do the Roth conversion for this year that I've been putting off.

[Cougar]

yes, the dow is down about 5% off its all time highs of less than 2 months ago.

in addition, august and september are the 2 worst months for the stock market, so seeing a sell off here of 5% should not be a big deal.

now, the mrket has broken some trendlines of the bull market it was in; but it can reverse that with a strong week next week.

what i'm saying here is to not panic and go all cash just because the dow dropped 1,000 points this month. if this truly is the end of this current bull mkt, there will be plenty of chances to get out on a rally. you'll have to determine your exit,/re-balance if youre going to do that or find some professional you believe in.

(in full disclosure, i shorted the market august 3rd; but i wouldnt advise doing that unless you've got years of experience of following the mkt and charting it and i still couldve been wrong but the economic data has been trending down; so i thought it was a good risk).

[GuitarStv]

I started investing mid 2008 . . . it helps to only really pay attention to these numbers the once per year that you rebalance.

[Alf.traveler]

Your comments are very heartening, as usual. :-)  We just opened Vanguard accounts on Monday; I bought VTI on Monday and my spouse this morning.  I keep reading over Jim Collins's first installment of the stocks series and reminding myself to "toughen up, cupcake" and learn to deal with risk.  Clicking from 1 day's results to 1 year/5 years/10 years/All puts things in perspective; hopefully the emotional angle will get easier the longer we're in the game.

[cincystache]

I started investing mid 2008 . . . it helps to only really pay attention to these numbers the once per year that you rebalance.

+1...

Regardless of your age... the majority of people would be better off following these three steps.
1. pick an asset allocation that lets you sleep comfortable at night
2. buy low-cost index funds at that allocation
3. re-balance periodically back to that allocation and ignore ALL of the noise while enjoying your life.

Stock market falling below 17,000 falls under the "noise" category

[TheOldestYoungMan]

The OP asked for what it does to those 0-3 years out, and I hope I'm in that category.

This close, I've stopped paying attention to what the market is doing in its entirety.  Success or failure is overwhelmingly going to be determined by my savings rate during the home stretch, and my ability to control costs once my income drops to post-FIRE levels.

It's a better use of my time to figure out a better/cheaper way to accomplish some necessary household thing than it is to try and time the market.

If it matters, I'm better off, because my next purchase is at a discount.  The rate at which I put money in is at it's highest point.

Once I'm done accumulating, then I'm done.  It is as nothing to get a part time job for a few weeks to cover a year's spending if during FIRE the market tanks one day or another.  Scooping ice-cream for minimum wage is only horrible (would that be horrible?) if there's no end in sight.

The biggest threat to me reaching my FIRE number is me saying "fuck it" right now and just figuring out how to make what I've already saved work.  I have a bad case of TLY syndrome (two less years).

The chart of the DOW does look suspiciously like what it looked like in 2008/2009.  The trick is it has looked like this at some point every year.  As I recall it did this twice in 2012.  A total market tank would be no fun, but I'll be fine.

It's the low annual expenses that make this work, not the market performance.

[Jersey Brett]

you're not going to like this but here goes. Technical analysis is not phrenology. The people that do it right are billionaires several times over. Some of them started with $3000. If you look at the chart for oil for the last three month, you will see it traded along the lower band (bollinger bands) for a large portion of that time. That is a market in free fall, the price of oil has responded accordingly.

The stock market has much more random price action, it does not tend to trend like commodities, still you can find ten year periods where you would have made NO MONEY on the drift (where you put it in, leave it and average 7% over a fifty year period (you hope)) Currently, the securities markets are riding that lower band. It is a bad sign and I have made a significant amount of money this week shorting the market.

All bull markets end. All bear markets end. If you want to close your eyes and hope, you get what you get.

[webguy]

I just threw $15k into VTSAX and VXUS yesterday and today. Gotta love this sale!

[Christof]

The people that do it right are billionaires several times over.

Who for example?

[thd7t]

This is barely a correction, yet.  The market is off under 10% and has been off 6% for under a week.  I don't really think that calling it a bear market or even a "sale" makes it so.  This feels like a blip, so far.  I guess it could continue downward, but as many people have pointed out, who cares?

[forummm]

you're not going to like this but here goes. Technical analysis is not phrenology. The people that do it right are billionaires several times over. Some of them started with $3000.

Since you say they exist, please provide at least 2 names of people who currently have at least $3 billion and started with only $3000 and made their fortunes strictly through active trading of trends already in progress (and not through some kind of active management or influencing of prices or businesses).

[Jersey Brett]

Bruce Kovner
Mark Weinstein

[cincystache]

you're not going to like this but here goes. Technical analysis is not phrenology. The people that do it right are billionaires several times over. Some of them started with $3000...

... I have made a significant amount of money this week shorting the market.

I applaud you for throwing out a contrary opinion and for making some good money this week. Have you ever been wrong on timing the market though? My guess is that if you added up all the wins AND losses AND time you spent on "analysis" AND commissions AND short term taxes your net win is probably not as big as you think vs. a more passive approach. If you enjoy the game and get entertained by doing the analysis I'm not knocking it but at least admit that luck plays a huge role in the process... I only ever hear about people when they are winning, but they are always quiet when they are losing. The parallels between gambling are very clear. Professional poker players can outplay the average Joe but even they admit that luck is at least a factor, if not a very large factor.

Out of the 500 billionaires in the USA I would guess that maybe 10 (probably much less) of them have made their billions solely from technical analysis of financial markets. That is 1 out of 30,000,000 in the US. Personally, I know there are a lot smarter people out there trying to do this (you are probably one of them) so I choose not to play. I'd rather get 80% of the benefit for 20% (or less) of the work. I also know of people who bought a lottery ticket and turned 1 dollar into 300,000,000 but I don't call them financial geniuses, I call them lucky.

That being said, I do wish you the best of luck and if you're one of the 1 in 30,000,000 someday I'll gladly admit that I was wrong. 

[NoraLenderbee]

WHY DID THE STOCK MARKET GO DOWN TODAY?

Why Trade Futures? Diversify your portfolio and maximize capital.
Wall Street Journal: Tensions in Ukraine and the Crimean peninsula
Yahoo Finance: Russians
Fox Business: Obamacare
CNBC: It didn’t sell off at all, it was actually a reverse rally
Forbes: Taxes are too high
Huffington Post: Taxes are too low
Fox News: Gay marriage
Motley Fool: Sign up here to find out!
Bloomberg TV: The opposite of whatever CNBC said.
Quartz: Chinese shadow-banks
FT Alphaville: Chinese derivatives
Washington Times: Fallout from explosive Benghazi revelations
StockTwits: Here’s a chart
USA Today: Let’s take a poll
DealBook: lack of M&A
Zero Hedge: Better question, why would it have gone up?
MSNBC: I’m not sure I’m comfortable with the term “stock market” per se…
Business Insider: Ten reasons, actually (view as single page?)
Financial Times: Please take a moment to register and accept cookies
MarketWatch: 1929
The Reformed Broker: More sellers than buyers
Buzzfeed Business: It’s like that time on Party of Five when Charlie was giving Julia the silent treatment…
Reuters: HFT
Barron’s: Valuations got ahead of themselves
Investors Business Daily: drop in momentum. And record deficits.
History Channel: Ancient Aliens

Stolen from an article back in 2013 http://thereformedbroker.com/2014/03/13/why-did-the-stock-market-sell-off-today/

This is great!

[Jersey Brett]

I applaud you for throwing out a contrary opinion and for making some good money this week. Have you ever been wrong on timing the market though? My guess is that if you added up all the wins AND losses AND time you spent on "analysis" AND commissions AND short term taxes your net win is probably not as big as you think vs. a more passive approach.

Hi Cincystache, profit and loss is something I track carefully. The market acts randomly most of the time. So those buying and selling with no plan come out even or worse. I choose trades that have better than 50/50 odds of success, even still I am wrong probably 30-35% of the time. It does take a lot of time and work, so much more than you would think, but so does sitting in a boring job making $20 an hour. My income is only limited by my skill.

While the skills of gambling translate to trading, it is not gambling. The element of luck plays a much smaller role. If it didnt no one would succeed.

[wenchsenior]

The only problem I have is that I'm not scheduled to buy again for ten days.  Hope it continues to drop, this is awesome!

Same here. I'd like a year or so of market down 10%. Would be SO helpful.

[cincystache]

I applaud you for throwing out a contrary opinion and for making some good money this week. Have you ever been wrong on timing the market though? My guess is that if you added up all the wins AND losses AND time you spent on "analysis" AND commissions AND short term taxes your net win is probably not as big as you think vs. a more passive approach.

Hi Cincystache, profit and loss is something I track carefully. The market acts randomly most of the time. So those buying and selling with no plan come out even or worse. I choose trades that have better than 50/50 odds of success, even still I am wrong probably 30-35% of the time. It does take a lot of time and work, so much more than you would think, but so does sitting in a boring job making $20 an hour. My income is only limited by my skill.

While the skills of gambling translate to trading, it is not gambling. The element of luck plays a much smaller role. If it didnt no one would succeed.

We'll have to agree to disagree on this, I wish you the best.

[TheInsuranceMan]

Man, I start a thread, get bashed for even thinking this might turn into a bear market, get told 17,000 had no meaning, and now we're -500 pts today on the DOW, and there are 40 more posts here.  I guess I just had to wait for other opinions - and whether or not it ends the bull market is something I don't know, I mentioned that I had read 17k was a resistance point, and mentioned we could trade sideways or down - obviously, it could find support early next week and make gains.  I just was aware of it, and wanted to get people's points of view.