Art Cashin-“The Thursday/Monday Syndrome"
We had suggested yesterday that we should
probably explore the history of what old fogey traders refer to as the Thursday/Monday
syndrome. While it would be pretensions to say that was prophetic, it was, to say the least,
serendipitous, for yesterday’s action looked like the perfect first step in a Thursday/Monday
setup.
“We had intended to give you a more thorough history of the syndrome with lots of
analytical examples starting with the classic one – October 1929. Unfortunately, events are
moving too fast this week, so we have neither the time nor space to wax poetic on the topic. So,
you will just have to rely on my recollections of 50 years of watching markets and hundreds of
nights studying market history.
“The classic Thursday/Monday syndrome starts with the kind of action we saw yesterday.
The markets open under pressure and selling accelerates in swelling volume. By early afternoon,
there is a virtual stampede of selling. Then, later in the session, stocks stabilize a bit based on
some reassurance. On Thursday, October 23, 1929, that reassurance came in the form of Richard
Whitney bidding ‘205 for 10,000 steel’ on behalf of the bankers’ rescue pool. (Read a terrific
account in the chapter ‘The Crash’ in Fredrick Lewis Allen’s marvelous and essential ‘Only
Yesterday’.)
“The action on Friday (and Saturday in the case of 1929) is uneven, often ending
choppily steady or somewhat weaker.
“Then on Monday, the trapdoor opens with liquidation and margin calls bringing
tsunamis of selling.
“Is that what’s going to happen? Who knows? If it were that easy, kindergarten kids
could do this. But chance favors the prepared mind. Old fogeys will guard against undue risk
and exposure. Some may even get out a special shopping list. They will set their basket right,
put in silly bids and hope some panicky soul throws a bargain in. Recall the story of the floor
messenger boy, who, in 1929, according to legend, bought White Sewing Machine with his silly
bid of one dollar when all other bids canceled.
“One final note on the syndrome. Not infrequently, the Monday massacre spills over into
Tuesday morning – a capitulation bottom in mid-morning resulting in a massive reversal to the
upside.”
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