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Reviewed by Nov 11, 2021| Updated on
Yo-yo is a slang word for a market which is very competitive. The name derives from a yo-yo's movements, where security prices gradually rise and fall. A yo-yo market, taking on aspects of both, has no distinctive features of either an up or down economy.
In a yo-yo market, security prices swing from high to low over a given period of time, making it difficult for investors to buy and hold on to income.
Nonetheless, yo-yo markets can be competitive places for astute traders who can identify the buy and sell points and do business before the market reverses. Such markets are distinguished by steep fluctuations in share prices, which may occur in a limited time frame, such as weeks, days or even hours.
The motions are often rapid, and usually involve a lot of moving stocks in unison. Wall Street traders often refer to this type of activity as "everything or nothing," because everything about the market will be either good or bad.
Yo-yo markets are uncommon, especially those that last for days or more. These are more likely to occur as market volatility is gaining momentum after a sustained increase in stock prices, which can make investors anxious.
Consider the Dow Jones Industrial Average (DJIA) never fluctuated by more than 3.5% during the first half of 2015 as it rose to record heights. In August, a combination of macro-problems, including China's weakening economy, falling oil prices, and the possibility of higher interest rates, and sent the stock market into a sharp downturn.
The market witnessed eight trading days from 20 August 2015 to 1 September 2015, during which the Standard & Poor's 500 index advance/decline reading was either above 400 or below 400, meaning that 400 of the 500 stocks in the index were either advancing or decreasing at the same time.