May 6, 2010 – The Strange Stock Market Day

For those of you that invest in stocks, did you notice something about today? Absolutely bizarre is about the best way I can describe it. I’m going to talk about stocks in particular and some of the wacky things I noticed (not to mention my portfolio took a tumble).

The Dow

The low for the DOW today was 9,977. The high was roughly 10,874. That’s nearly a 1,000 point drop in a day. View the DOW here and click ’1 d’. Isn’t that interesting. Stocks have been puttering along, mostly up for a while and I am amazed as a new investor how quickly everything dropped. It seems the Greeks (and their economy) are the cause for this fear. But there’s only 20 million of them. They can’t affect the world…can they?

A few stocks

I own stocks. It’s interesting to watch the tumble that took place today. I made the mistake of selling in panic when I was first investing in February. I’m facing this same dilemma. Do I dump what I have and cut my losses? Or do I hold on optimistically? These are tough questions, but I am an optimist. I’m hanging on darn it. Living a life of fear is just not for me. I know I need to be smart and not just blindly hold on. But I believe things will be ok. I believe most people are panicking. I view this as a good time to buy.

Let’s take a look at a few stocks I own and the immense tumbling they took today. The first is PVX – Provident Energy Trust. This is a Canadian Oil and Energy trust. It tumbled about 8% today. That is the most I’ve seen it drop easily since I’ve owned it. Here are some interesting figures:

• PVX high was $7.83 today.
• PVX low was $4.35… $4.35 you read that right, wow.
• PVX is now back up to $7.33 in after hours trading, a good amount below what I paid for it.

The next one is NYMT. This is New York Mortgage Trust. They deal in high credit quality residential adjustable rate mortgage (ARM) loans and mortgage-backed securities (MBS). They are still a bit above what I paid for them.

• NYMT high was $7.68 today.
• NYMT low was $6.35… Still a big drop.
• NYMT is now back up to $7.28.

My Theory

My theory is that a bunch of people sold their stock, plain and simple. Whether it was an automated system, or existing orders being filled, tons of shares were traded and sold. If you look at the dips, they shoot right back up. That means there were many smart buyers who realized the great opportunity there was to buy more stock at an amazing price.

Calling all financial gurus… What do you make of the action that took place in the stock market today? Should we worry? Should we sell? Is it a good time to buy?