October 20, 2007
Twenty Years Later, Putting the Crash in Perspective
Ugly day of trading on October 19, 2007 — the Dow Jones Industrial Average dropped 2.6%. Twenty years ago on October 19, 1987 the Dow Jones Industrial Average dropped 22.6% in one day. This is what the chart would look like if the DJIA dropped 22.6% last Friday. You have to put things in perspective. ;-)
Cat: | Time: 6:12 pm (utc+8)
October 20th, 2007 at 7:18 pm
That chart looks about right. But in order to completely wring the excesses from our financial system, it would then need to continue drifting lower to about 7500-8000 to properly get the attention of those in charge - and hopefully effect some change.
October 20th, 2007 at 11:41 pm
If i be a spider, my senses would tingle out of this world. I fear for the bulls.
October 21st, 2007 at 1:29 am
The recent mention of V Niederhoffer here got me to dust off my copy of The Education of a Speculator. I stumbled over a tract that still seems timely to me. He wrote in the chapter called ‘Deception and Charts’:
“Following 1987, longs would be nervous Fridays, and should their fears be justified by a down close on Friday, the ensuing Monday should be the stage for a rout. In actuality, the exact opposite has occurred. In the nine years following 1987, of the 44 occasions when the S & P mimicked the crash by dropping more than four full points on a Friday, it rose on the subsequent Monday on 28 occasions. The average rise on these Mondays, into September 1996, was 3.5 S & P points. What explains the transformation? Many fewer weak longs were around in the post-1987 environment, leaving stronger, better capitalized longs as the remaining holders. The dupes were forced to cover, squeezing each other in their rush to escape their short positions.”
11 years on since he wrote that, I’d love to see some follow up on the stats, but I think that the idea probably still applies. I’m looking for a 250-300 point rise for the indoos on monday.
October 21st, 2007 at 2:13 am
The FED will be busy all weekend xeroxing currency ( no time for printing this time around ). It’s all a cosmic joke.
October 21st, 2007 at 7:44 am
prairiedog,
You may be right for monday. But the bears will mount an attack immediately right after the rally. Bank on it.
October 21st, 2007 at 7:45 am
Did you see how quiet Cramer was on Friday, essentially all day?
This is not signs of a bottom. It’s when he comes out kicking and screaming and crying and begging, that’s when we get the bottom.
Something very eerie is looming.
October 21st, 2007 at 10:47 am
cdnp: I’m amazed by how much stock (ha!) Niederhoffer puts into those stats … as he said in the article:
“Most of the time, these computer analyses don’t work, but it gives you an anchor. My checkers teacher said even a bad system is better than no system at all.”
That line made me chuckle.
October 21st, 2007 at 12:25 pm
[…] Maoxian » Twenty Years Later, Putting the Crash in Perspective (tags: stocks) […]
October 23rd, 2007 at 7:05 am
Certainly puts it into perspective. Everyone thinks the world is ending on a 2.6% loss now, but we see how much worse it can be and certainly some day we will see another crash in the markets.
December 9th, 2008 at 11:08 am
just happen to stumble upon in google images.
if you could see us today. :-(
haha.
December 9th, 2008 at 12:00 pm
@Buy: Yeah, it’s been a slow motion crash this time, not a one-day affair.