It was 20 years ago today.......

Seargent Pepper told his band to SELL!!!!! Or something like that.


20 years ago today the US stock markets were pummled into submission. It was known as Black Monday here in the states. The event itself was a major blow to the newly appointed Fed chairman Alan Greenspan.

First off, I am no longer a trader, nor do I claim to make recommendations on here about and buying or selling. This is an opinion post only!!!!


The market then is quite different from the market then, but I believe we are looking at the same type of sell off. As I sit here now, the market is down some 200 points right now. Today is an options expiration day and historically that means sell the morning and buy the close. Its actully a manipulative play that works quite well for the traders, but completely legal. BUT...today I am afraid we do not buy the close, and we continue to sell on Monday. We would need a loss of over 1500 points for any comparisons to be made and elements in the markets almost won't allow that, unless major events take place during the day. We now have triggers in the market that are set off to protect such sell offs. The first is the stopping of basket trading. This is electronic trading the automatically happens when certain levels are broken and often accelerates selling to the down side. The circuit breakers are set off and that type of trading is halted for a period of time.

Beyond that......I believe things to be very ominous. The credit crisis and llack or liquidity is killing new orders. The weak dollar has been helping big business in many ways, especailly with propping up earnings due to these companies selling goods over sees and translating that money back into the US$. I am afraid that this too is being over taken by the weakness of new orders here at home. Caterpillar (CAT) has been one of these companies reaping huge windfalls from the weak US$, but today they warned that US sales are hurting more than the weak $ is helping. Not a good indicator. United Technologies met their last earnings, but wanred on weak sales, 3M Corp said the same. Now that the bottom lines of the big guys are hurting too, that means that the market as I see it is a tipping point. A very dangerous tipping point.

The S&P index is fairly valued, or it was based on 2nd and 3rd quarter earnings. Just about every company has lowered guidance for the 4th quarter, the year and 2008. That means that the S&P in my view is over valued and must come down to trade in parity with the value of the stocks. Sound familiar? 2000 all over again, but.....companies are much stronger than the were then. In 2000 we were trading companies at extreme values with no earnings, never had earnings and never did end up with earnings. BUT, with the on slaught of the credit crunch, and regardless of what the FED does, it is far, far from over, we are going to see major hits in the markets. I expect retracements of 15-20%. The first move probably will be a bit drastic, but it will rebound and sell off again. Probably taking 6 months to play out and reach my targets.

The FED has a lot of blame for the current conditions if you ask me. Most of due to its free money satnce it took post 9-11. Greenspan acted heroicly and corageously after 9-11 lowering rates and saving the Economy. BUT, he waited way to long to start reveresing rates. Money was essentially free for too long. People could borrow money at low rates, invest in treasury notes, and once inflation was accounted, would actually profit from holding the money to maturity and then paying the loan back. The FED slowly brought rates back to a more normal level, yet still historically low. Back in 1987, rates were much, much higher.

Anyway, I don;t have time to really go into detail right now, as I have to get back to work. Just want to let you all know ...IT WAS 20 YEARS AGO TODAY. THOSE WHO DO NOT REMEMBER THEIR HISTORY ARE DOOMED TO REPEAT IT. All those stock jockeys out there who were in highschool when it happened have no idea how dangerous the market is right now.... Becareful, IF THEY DO NOT BUY THE CLOSE TODAY, MONDAY WILL BE VERY PAINFUL. The market always carries through from the close to the open.

[edit on 19-10-2007 by traderonwallst]