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Awesome! Don't you just love MONDAY's?!
For years ... while in the work/slave force ... I dreaded Mondays. Now I can't stand the two day weekend wait for Monday to come around!
SCALPED $1.27 OUT OF SQQQ!!!!
MARKET GAP DOWNS THE DAY AFTER OPEX USUALLY BOUNCE BECAUSE EXCERCISED PUTS BECOME SHORT POSITIONS THAT MUST BE COVERED!!!!!!
See that dark area moving across the middle of the sun!
http://sdo.gsfc.nasa.gov/assets/img/latest/mpeg/latest_1024_0193.mp4
If you are not paying attention to what the sun is doing, your situational awareness is going to suffer! It's 99.98% the Sun!
https://earthquake.usgs.gov/earthquakes/eventpage/us7000i90q/
What quake ? They had a quake ? I don't recall hearing about any quake.
https://www.google.ca/search?q=taiwan+quake&sxsrf=ALiCzsZJq3TyYl4yGv0kDsEParJH2_pvQg%3A1663594194493&source=hp&ei=0m4oY5H8G9fl0PEPz_yM-Ag&iflsig=AJiK0e8AAAAAYyh84sZtaSmMbsOpawBZpVuTYj7DcAP0&ved=0ahUKEwiRrYuo-6D6AhXXMjQIHU8-A48Q4dUDCAk&uact=5&oq=taiwan+quake&gs_lcp=Cgdnd3Mtd2l6EAMyBQgAEIAEMgYIABAeEBYyCAgAEB4QDxAWMgYIABAeEBYyCAgAEB4QFhAKMgoIABAeEA8QFhAKMggIABAeEA8QFjIICAAQHhAPEBY6BAgjECc6CwgAEIAEELEDEIMBOhEILhCABBCxAxCDARDHARDRAzoICAAQsQMQgwE6CAguELEDEIMBOgsILhCABBCxAxCDAToOCC4QgAQQsQMQgwEQ1AI6CAgAEIAEELEDOhQILhCABBCxAxCDARDHARDRAxDUAjoICC4QgAQQsQM6CwgAEIAEELEDEMkDOgUIABCSAzoLCC4QgAQQsQMQ1AI6BAgAEANQAFipJ2DTP2gAcAB4AIABjAGIAbIGkgEEMTEuMZgBAKABAQ&sclient=gws-wiz
Oh.........Okay. Now I see.
It looks like Taiwan had a quake.
.
I've built enough buildings to know, tech manufacturing will be shut down for at least a month due to Taiwan quake. Everything is bent to shit and water everywhere it shouldn't be! Nothing clean in the clean rooms!
GREAT post, Cap'n. Thanks for sharing it on the board.
#SQQQ: Escalation: Recent Events Suggest Mounting Economic Danger
THEY'VE BEEN KICKING THE CAN FOR SO LONG NOW......!
https://www.zerohedge.com/markets/escalation-recent-events-suggest-mounting-economic-danger
https://alt-market.us/escalation-recent-events-suggest-mounting-economic-danger/
Escalation: Recent Events Suggest Mounting Economic Danger
Tyler Durden's Photo
BY TYLER DURDEN
SUNDAY, SEP 18, 2022 - 08:10 AM
Authored by Brandon Smith via Alt-Market.us,
A common refrain from people who are critical of alternative economists is that we have been predicting crisis for so long that “eventually we will be right.” These are generally people who don’t understand the nature of economic decline – It’s like an avalanche that builds over time, then breaks and quickly escalates as it flows down the mountain. What they don’t grasp is that they are in the middle of an economic collapse RIGHT NOW, and they just can’t see it because they have been acclimated to the presence of the snow and cold.
Economic decline is a process that takes many years, and while you might get an event like the market crash of 1929 or the crash of 2008, these moments of panic are nothing more than the wreckage left behind by the great wave of tumbling ice that everyone should have seen coming far in advance, but they refused.
In 2022 the job of warning people is far easier than it used to be because we are well past the midpoint of the process of decline. But, believe it or not, I still get people today who claim that we analysts are “doom mongers.” The power of willful ignorance is truly amazing. It’s enough to make a person blind to stagflationary crisis, supply chain disruptions, quickly inflating prices, stock market carnage, bond market instability, record consumer debt, and international conflict.
At this point, I think if a person can’t see the dangers ahead they are probably a waste of time and space and are destined to be buried in the ice; there’s nothing that can be done for them. Yes, there are some people out there that don’t get exposed to the information and we have to take them into account, but my priority will be people that are awake and aware and try to give them a sense of what point in the collapse process we find ourselves.
In the past month there has been a considerable uptick in economic and geopolitical activity that suggests we are entering a new phase, and not surprisingly it’s all accumulating right before we hit October.
Here are the events that I find most concerning:
The European Energy Crisis :
This is an event that I have been predicting since the Russian invasion of Ukraine and now it is upon us. I wrote about it extensively in my recent article ‘Europe Is Facing Energy Disaster And It’s Going To Bleed Over Into The US’ so I won’t rehash all that information here. What I do want to point out is the complete lack of planning on the part of European officials to deal with the threat. It is as if they WANT a full spectrum disaster.
Russia has now completely cut off natural gas supplies to Europe, which represent around 40% of all EU energy resources. Europe’s benchmark natural gas prices spiked by 28% a week ago, on top of already existing inflation. Oil supplies are also in steep decline for Europe and the EU government has pledged to cut what’s left of Russian oil imports by sea at the end of the year. Sadly, they have offered very little in the way of solutions to the supply-side problem.
There has been talk of increasing imports of alternative resources from other nations, but the EU is already buying up around 75% of all liquid natural gas from the US. OPEC oil producers have indicated they will not be attempting to increase production anytime soon (probably because they can’t due to inflation in operation costs). There is NO backup energy resource for Europe; it doesn’t exist right now.
They will try to buy up whatever coal, oil and gas they can find on the market while driving up prices even more for other countries. They will still come up short, which means people are going to freeze this winter.
Best case scenario is that there are mostly mild temps and people barely scrape buy with minimum heating. But EU industry is going to suffer and many manufacturers are going to cut production (which mean more stress on the global supply chain).
Core Inflation Is Still RisING
As I warned last week in my article ‘It’s A Fact That Needs Repeating: The Federal Reserve Is A Suicide Bomber,’ inflation is continuing to rise despite the Fed’s continued interest rate hikes, giving the central bank even more ammunition to justify higher rates into extreme economic weakness.
The latest CPI print showed an increase to 8.3% and was a shock to markets which universally expected a drop. This is the nature of stagflation – Even with falling demand prices continue to climb or remain high for extended periods. The stagflation event of the 1970s lasted for a decade until the Fed jacked rates to 21% and then employment crumbled in the early 1980s.
This doesn’t mean that rates will go to 21% this time; they don’t need to. All it would take is a Federal Funds Rate of around 4% – 5% to crash our current QE addicted system. A 75 bps rate hike is now widely expected at the next Fed meeting this month, with some predicting a 100 bps hike. This would put us close to crash territory for markets and for employment, though I think we still have well into 2023 before unemployment really starts to spike.
Putin’s Meeting With Xi
As I write this, Vladimir Putin is set to meet with China’s Xi Jinping and the nature of the conference is not clear. There are the obvious points of agreement such as China’s continued purchases of Russian oil and other commodities, as well as the ongoing plan to build a pipeline to China by 2025. There is also strategic cooperation which is evident in the recent naval exercises between the two nations around Japan and Taiwan.
The timing of the meeting is concerning to me, because the prime season for a potential Chinese invasion of Taiwan is fast approaching (October is the best month for naval movements to avoid typhoons). China would not necessarily need to commit to a ground invasion, either. They could simply cut off all import/export trade from any source other than China and starve Taiwan until they accept unification.
There is also the issue of Ukraine and arms sales. With the amount of propaganda coming from Ukrainian Intelligence and NATO, it’s hard to say what is actually happening, but I suspect Russia is changing strategies and repositioning to deploy missile and artillery bombardment of infrastructure, including power grids and water. This is a tactic that Russia has avoided for months (until this week), which is surprising because one of the first measures usually taken by the US during an invasion is to eliminate most key infrastructure (as we did in Iraq). You would think Russia would have done the same, but perhaps they were saving that scenario for winter when it is harder for Ukraine to cope.
This would make Ukraine essentially unlivable in the coming winter for most of the population. Putin may be seeking to ensure China remains a steady economic partner should geopolitical pressures increase. They may even be making a deal of mutual support: China takes Taiwan while Russia makes Ukraine a resource wasteland and they each support the other economically when NATO counties try to impose sanctions on China. We probably won’t know until October, but the timing of the meeting should raise eyebrows.
If the manure is about to hit the fan in Taiwan along with Ukraine, then diplomatic and economic ties will be severed and western access to China’s manufacturing will be cut. This is a problem for China’s economy, certainly, which may be why they have continued their mass covid lockdowns well after every other government has abandoned them. Could this be practice for civil controls in an impending war environment?
China’s global dominance in imports/exports gives them considerable economic leverage in trade, however. Many nations would not support sanctions against them. Also, their vast holdings of US dollars and Treasuries could be used as a weapon to damage or destroy the dollar’s world reserve status. If China invades Taiwan this year, then all bets are off – The economic decline will move swiftly from that point on.
There are many other trends which factor into the crash environment but the above factors are the most recent and hold the biggest potential for causing a domino effect globally. The question that always arises is “what can we do about it?” Not much in terms of prevention. What we can do, though, is prepare locally to weather the storm. This means stocking necessities before they rise even further in price or become non-existent. Become a producer and learn a valuable skill for survival in a depleted economy Organize with people locally who are on the same page to create security and alternative trade opportunities.
Hopefully, the aware citizenry will rise to the challenge and organization will be extensive, because the worst case scenario would be great masses of completely isolated people all vying against each other rather than working towards mutual security. Even in a slow collapse scenario this is a problem in terms of rising crime; so plan on working with others if you want to avoid inevitable third world conditions.
* * *
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SHOW COMMENTS
$3.2T OPEX TODAY WHICH IS WHY MARKETS HELD AFTER THE GAP DOWN.
NEXT WEEK ANOTHER RATE HIKE!!!!!!
STILL LOTS MORE DOWNSIDE FOR THE REST OF THIS MONTH AND MASSIVE CORRECTION IN OCTOBER IMO!!!!!
FEDEX WARNED AND MANY MORE COMPANIES WILL FOLLOW!!!!
GLOBAL SLOW DOWN IS SETTING IN, DOOM IS IN THE AIR!!!!!
I AM HOLDING SQQQ AND LOOK FOR SCALPING OPPORTUNITIES TO INCREASE MY POSITION. SUCCESSFUL SCALP TRADES IS FREE MONEY!!!!!
Bad ending to the day .. ..for SQQQ still holding
Was looking for a bigger swing today, but you’re right
PLENTY OF INTRA-DAY MICRO SCALPING OPPORTUNITIES IN CHOPPY MARKETS. MULTIPLE SMALL GAINS ADD UP OVER TIME!!!!!
WHEN THE PPT ISN'T ACTIVE THIS TYPE OF TRADING IS MUCH EASIER.
ITS A GAME!!!!!
#SQQQ: FedEx Has Biggest Drop in Over 40 Years After Pulling Forecast...
HEY AGOURA DUDE......SURE LOOKS LIKE A TRAIN WRECK....!
https://www.bloomberg.com/news/articles/2022-09-15/fedex-pulls-annual-forecast-as-preliminary-results-disappoint?srnd=premium
FedEx Corp. saw its biggest stock drop since at least 1980 after withdrawing its earnings forecast on worsening business conditions, a potentially worrying sign for the global economy.
The package-delivery giant flagged weakness in Asia and challenges in Europe as it pulled its prior outlook and reported preliminary results for the latest quarter that fell well short of Wall Street’s expectations. The conditions could deteriorate further in the current period, FedEx said.
The company will take immediate steps to cut costs, including parking some aircraft, cutting workers’ hours and closing more than 90 of its roughly 2,200 FedEx Office locations.
Put simply, it was an “ugly quarter,” according to Robert W. Baird & Co. analyst Garrett Holland. “Global freight demand has significantly deteriorated.”
FedEx shares tumbled 22% at 9:30 a.m. in New York on Friday.
While US economic data has been mixed, with employment and manufacturing holding up, companies across industries are starting to paint a grimmer picture of the economy. Conditions in Asia and Europe also appear to be weighing on the US, where consumers are shifting spending into travel and concerts and away from online shopping.
General Electric Co.’s chief financial officer warned Thursday that the company is seeing pressure on cash flow amid supply-chain snags, while industrial titans U.S. Steel Corp., Alcoa Corp. and Nucor Corp. have said deliveries are waning. The chief executive officer of McDonald’s Corp. said Wednesday he expects a minor US recession in 2023 and a more significant one in Europe.
Recalibrated Spending
Earlier this summer, retailers such as Walmart Inc. and Target Corp. scaled back expectations as consumers recalibrate their spending. In August, shipping containers arriving in Los Angeles -- the US’s busiest port -- fell by the most since the early days of the pandemic, which is another sign that demand is moderating.
FedEx’s bleak comments are a setback for its new CEO, Raj Subramaniam, who had won investor support shortly after taking the reins in June by raising the dividend, agreeing to revamp the board and laying out a multiyear plan to boost profit. Subramaniam now must steer the courier through a post-pandemic economy in which consumers are spending more on services than discretionary purchases.
Earnings, excluding some items, for the fiscal first quarter were projected to be $3.44 a share, Fedex said in a statement late Thursday detailing preliminary results. That’s well short of the $5.10 average estimate of analysts. Preliminary revenue of $23.2 billion in the period ended Aug. 31 narrowly missed expectations.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US,” Subramaniam said in the statement.
The news triggered a raft of downgrades and price target cuts from Wall Street analysts. UBS AG analyst Thomas Wadewitz said the Express business is the primary driver of weak performance, though Ground operations also missed estimates.
“Express operating income was 75.8% lower than our forecast and Ground operating income 7.5% lower than our forecast,” Wadewitz said in a note to clients. “While we understand that Express is an asset-intensive business with a high fixed cost structure, we have a difficult time understanding what items could drive operating income lower to the extent seen.”
SQQQ $60'S COMING NEXT!!!!!!!!!!!
LOTS AND LOTS OF MONEY BEING MADE!!!!!!!!!!!
Way to GO Cap'n! You S Team are cleaning up!!!!!!!!!!!!!!!!
I keep loading these cheapy T shares as S climbs higher and higher. Just can't help myself ...
(Warren B. would be proud of me I'm betting).
#SQQQ: HOW ABOUT $54.23 TODAY.... go lucky dude
#SQQQ: Quadruple Witching TODAY... $50.23
https://new.reddit.com/r/Wallstreetsilver/comments/xfnalh/today_is_the_3rd_of_the_year_enjoy_an_hour_of/
What Is Quadruple Witching?
The term quadruple witching refers to the date on which certain derivatives contracts expire simultaneously. This happens with four different types of contracts, including stock index futures, stock index options, stock options, and single stock futures. Quadruple witching dates occur four times a year on the third Friday of March, June, September, and December. Market activity on these days is typically highest during the last trading hour as traders try to move on these contracts.
SQQQ AH'S $49.38!!!! LOOKING GOOD!!!!
FEDEX WARNED AND IS GETTING HAMMERED IN AH'S.
SQQQ $50'S TOMORROW!!!!!!!!!!
#SQQQ: SOUNDS ABOUT RIGHT Agoura Guy....$50.. TGIF
I PREDICT SQQQ WILL BE IN THE $70-$80 RANGE DURING OCTOBER!!!!!
SQQQ CLOSED $48.14 +2.30.... GOING HIGHER!!!!!!
THOSE WHO DON'T TRADE MAKE ***NOTHING***!!!!!!!
Riding my 1000 shares to 53s
From 42 s
.
Sorry for finding this "funny".....LoL.......Mr. Buyer Every Day
EVERY DAY - Yeah, right.
On August 5th (I targeted $34)...........and that is precisely what happened.
.
It 's certainly not uncommon TO SEE those holding a position........TO "claim" that they've just bought SOME MORE !!!!
9 times out of 10 they're just totally lying.......in an effort "to rescue" thier holding.
I asked him to quit stalking and "back-stabbing me"........He couldn't adhere to the terms https://investorshub.advfn.com/boards/read_msg.aspx?message_id=169932257
.
As sort of a P.S. to my earlier post, minus any big traumatic event to rattle the markets, I'm guessing they are going to move the indexes back up going into next week. The chart indicates to me that would make sense.
Then when Powell tells us next week he's going to do his 75000% increase of interest rates and "kick this bad old nasty inflation a death blow in one big pincher movement" and get it over with ... the markets will sell down AGAIN -- possibly like they did last Tuesday so the "big boys" can add more cheap shares to their customer portfolios for the final quarter of the year. I'll be out of my T shares by then (prior to Powell kaa-pow-wowing) and ready to kiss up to S again like last Tuesday.
Of course it might not work out that way at all and the PPT might give a 500% UP day with the DAQ once Powell barks just to show us WHO is running the show. That Yellen gal is one slippery chess player I'm told.
I appreciate the warning, AG, but I feel the interest hike is getting baked into the markets currently, and won't trigger that big of a selloff for any length of time.
The big boys with lots of moola need to make their clients a profit by the end of the year. I don't believe they are going to try to do that by SHORTING the major indexes now; not for long anyway. Rather ... I believe they'll work in conjunction to manipulate quality company stock prices higher and higher going into November +.
You've read me ranting about the elections and the Democrats, and that is my "Ace card confidence" that I'll be able to make profits on my T shares if they go south on me in the shorter term.
I'm betting that $25 is close to the floor of T moving forward. Heck ya' it could hit $20. It could even hit $15 I suppose. But I'm not in any hurry for profits. I can wait until my under $26 priced T shares turn profitable.
Now that doesn't mean I'm done playing SQQQ. I have enough cash stashed away to play it as well, when it's time. Today - I just like T.
BE CAREFUL WITH T, ANOTHER RATE HIKE IS COMING NEXT WEEK!!!!
SQQQ WILL BE IN THE $50'S!!!!!!!
$25 is new bottom moving forward for T.
Four winos on the street corner told me so.
SQQQ $48'S PRINTING, $49'S NEXT!!!!! SEPTEMBER IS VERY GOOD FOR SQQQ!!!!!!
OCTOBER WILL BE EVEN BETTER!!!!!!!
THE FOOL WHO LAUGHED AT ME FOR AVERAGING DOWN MADE ***NOTHING*** SITTING ON THE SIDELINES!!!!!!!!!
Cashed out $46.60 premarket. Been in this longer than planned, decent profits.
GL
Lucky: Thanks for that very personal info and story. Sorry about your losses but sometimes life lessons can be very helpful.
So, if you don't have a margin account, then you just must trade via a cash account. I have one of those also and have been thinking about flipping the QQQ tickers daily but according to Schwab there are still some restrictions on how often I can flip. Any more pertinent info you can share?
Good luck
I do but I don't use margin.
Got my butt burned on it back in 2003. Took roughly $150,000 and turned it into $1.3 million dollars in four days flipping Boots and Coots International the third week of March (The week Prez. Bush and his team decided to take out Saddam).
Lost ALL of my $1.3 mill in about 1 hour on the fifth day of trading the stock. MM's pulled the plug on it and good old Amerit**de took me to the cleaners. Ended up not only losing my original $150,000, but ended up paying the broker over $4,000 in margin interest.
Amtd wiped out all my transactions on the transaction page minutes after the fiasco unfolded so I had no proof of what happened. Hence, couldn't win a lawsuit.
Understood the same thing happened that day with many traders who played Boots and Coots International that day. Allegation was that the servers got overloaded and couldn't handle all the exiting trading traffic. Nothing was ever officially admitted.
Won't EVER trust Margin trading EVER again.
good for you. You must have a margin account, eh?
Nice trade! I sold some low $40’s in the $45’s as well, but still holding some for another day or so.
GL
Bought a ton of S shares yesterday at $39.42 premarket. Sold them at 14:24 p.m. at $45.50. (Way too soon but had an appointment to go to late afternoon so I didn't want the risk of losing my profit).
Today I'm staying away from buying any 3xQQQ after yesterday's KILLING. Want to try to get a better handle on what unfolds from here.
Really nice post, Cap'n. EXCELLANT resource material!
#SQQQ: THE TIME IS RIPE... 16% GREEN...$46.23
HEY BIGGIEE.... CHECK OUT $SKF... FOR THE NEXT BIG GAIN....!
https://www.zerohedge.com/markets/market-turmoils-soaring-cpi-hammers-soft-landing-hope
https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/image%20-%202022-09-13T123244.112.png?itok=GzY5KocN
Nasdaq was the day's biggest loser, down over 5% - its worst day since March 2020... The Dow's 1200 point loss was the worst day since June 2020...
https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/2022-09-13_13-00-04.jpg?itok=9AU2dfso
.... PLUS ANOTHER 0.75% RATE HIKE NEXT WEEK!!!!!!!!
MARKETS ARE GONG DOWN A LOT FURTHER!!!!!!!
WHAT AN OPPORTUNITY TO HAVE LOADED UP ON CHEAP SQQQ YESTERDAY, I ADDED MORE @$40.63!!!!!!!!
MY SQQQ POSITION IS NOW NICE AND ***GREEN***!!!!!
I SAID SEPTEMBER WOULD BE A GREAT MONTH FOR TRADING SQQQ...
UP TO $49, DOWN TO $40...BACK UP TO $45.... AND WILL ROCKET INTO THE $50'S!!!!!!!!!!!
#SQQQ: LOOKING FOR $COMPQ @ MA200 NEXT STOP...11077.23
SQQQ TRADING AS EXPECTED AND ***PREDICTED***!!!!!!!
THOSE WHO DON'T TRADE MAKE ***NOTHING***!!!!!!!!
EASY MONEY HOLDING SQQQ INTO OCTOBER!!!!!!!!!!
$50'S COMING.... AND THEN $60'S!!!!!!!!
#SQQQ: HEY LUCKY... I'VE BEEN AT THIS A WHILE NOW...1987...!
https://www.avatrade.com/blog/trading-history/black-monday-crash-of-1987
Black Monday’ Crash of 1987
The ‘Black Monday’ crash of 1987 refers to the date of October 19th, 1987, when the tumbled over 22%. It was a loss that, to this day, remains the biggest ever single-day drop in stock market history. For context, during the infamous , the stock market recorded its biggest-ever single-day drop of just over 12%. The crash highlighted the financial risks of modern-day technologies and globalisation; because, unlike numerous other crashes, it was not triggered by any banking crisis. The ‘Black Monday’ crash brought about many reforms that continue to prevent or limit damages during crisis periods. took up the role of using liquidity to perform damage-control during crashes. Also, numerous stock exchanges implemented ‘circuit breakers’ that temporarily halt trading activity after a pre-set percentage drop is achieved during a rapid market selloff.
The Background
In the five years leading up to the 1987 crash, the DJIA had enjoyed a period of massive bullish momentum. The index printed a peak of just above 2700 in August 1987, more than three times higher than five years earlier. In the first seven months of 1987 alone, the DJIA had climbed over 44%, and there were already concerns that the market was ripe for a correction.
The bull run itself was powered by some , but there were looming dangers that largely remained ignored. The Federal Reserve had earlier been involved, together with other G5 nations, in an agreement that would be dubbed the ‘Plaza Accord’. The agreement was meant to address between the US and other G5 nations, and its implementation saw the US dollar purposefully devalued. A cheaper US dollar helped address some of the objectives of the Plaza Accord and additionally drove finance to the . By 1987, trading volumes at the NYSE were in excess of $181 million, compared to the average of just around $65 million in 1982. In 1987, the US was largely comfortable with the achievements of the Plaza Accord and sought a new agreement.
In February 1987, the Louvre Accord replaced the Plaza Accord. The new Accord sought to stabilise exchange rates as well as limit the slide of the US dollar. The Federal Reserve, during this period, also started to aggressively . This new monetary environment tightened the money supply in the US, and in the final quarter of 1987, stocks started to drift lower.
How the Crash Unfolded
The market was already in full sell mode in the previous week leading up to the crash. On Wednesday, October 14th, the markets recorded a loss of about 3.8% and then another loss of about 2.5% the following day. Then on Friday, October 16th, another major loss of about 4.6% was recorded. A market innovation at the time allowed participants to during the weekend using closing prices of the prior week. But there were numerous requests that brokers and other financial institutions supporting this scheme could not service.
Even before the US market opening on October 19th, 1987 (Black Monday), equity markets around the world had started tumbling hard and fast. Asian markets were the first to open, and in particular, New Zealand stocks were the worst hit, tumbling over 60%. European markets also plunged heavily and, in the US, the DJIA would on that day shed off over 500 points, closing 22.6% lower and recording the worst ever single-day drop in history.
The Markets after Black Monday
Although devastating, the Black Monday crash of 1987 went down as one of the most short-lived . The very next day, the DJIA gained about 102 points; and by the end of the second day, the market had cumulatively recovered over 288 points, which represented about 57% of its Black Monday losses. It would then take about two years (by September 1989) for all losses to be recovered. The markets then went on to experience a prosperous decade that saw the DJIA cross above 10,000 points in early 1999.
What Caused the Black Monday Crash of 1987?
It is generally agreed that the Black Monday crash was caused by a variety of factors. To start with, the market was on a 5-year bull run by 1987, and in the first seven months of that year alone, the markets were up over 44%. The markets had benefitted from a period of low-interest rates and a huge money supply in the US economy. But since the start of 1987, it was a market ripe for a correction. The Federal Reserve had started a period of hiking interest rates aggressively and abandoned an accord that was designed to . Inflation started rising, and the economy stagnated, yet the markets continued to rise. By all means, it was just a matter of ‘when’, and not ‘if’ the markets would dip, or at least correct.
Another major catalyst of the Black Monday crash was the use of . They were still relatively new in the markets in the 1980s, and most of them were programmed to trade off . This meant that during bullish periods, the programs would aggressively execute buy orders in the market, and during bearish periods, they would execute aggressive sell orders. On the day of Black Monday, aggressive sell orders were executed in the market and the chain reaction accelerated the collapse of the markets to new lows. These programs executed sell orders when a certain price threshold was achieved, and new rounds of selling then resurfaced as new lows continued to be created.
There was also a strategy dubbed Portfolio Insurance that further hastened the market decline. Portfolio insurance was an investment product designed to preserve gains during a bull run but when prices start to fall. It was invented in the late 1970s but became very popular with institutional traders in the 1980s when concerns about an overvalued market arose. They were essentially a , primarily computerised, and involved selling futures and against an underlying stock portfolio. The problem is that they were sold as absolute protection of any portfolio, and consequently, this brewed overconfidence as market participants did not fear higher valuations. Most portfolio insurance programs initiated the selling of when the markets fell by a certain percentage. Thus, while portfolio insurance did not kick start the selloff, they effectively ensured that it got out of control.
The Aftermath of Black Monday
In the aftermath of the crisis, the important role of the Federal Reserve was highlighted, something that was not witnessed during the 1929 crash, which eventually turned into the Great Depression. quickly moved to act as a and helped stem a looming crisis. The bank intervened to participate in the open market directly and even encouraged lenders (who were increasingly becoming nervous) to continue lending so as to prevent a liquidity crisis. This two-pronged intervention helped prevent the collapse of major institutions as well as the spread of the crisis into other sectors.
Another major consequence of the Black Monday crash of 1987 was the introduction of ‘circuit breakers’. A circuit breaker is a regulatory emergency measure that halts trading when a is reached in the markets. It basically helps to prevent panic in the market from getting out of control. Circuit breakers are governed by the SEC (Securities and Exchange Commission), and when triggered, they will halt trading for a specified amount of time to give market participants time to reflect on how to objectively react in the market when trading resumes.
In the US, the is used as a reference for circuit breakers to be triggered. There are 3 levels that will trigger a circuit breaker: Level 1 will be triggered if the S&P 500 falls by 7% from the previous market close and trading will be halted for 15 minutes; Level 2 will be triggered if the index falls by 13% from previous market close and trading will be halted for 15 minutes; while Level 3 will be triggered if the index falls by 20% from the previous close and trading will be halted for the remainder of the trading session.
These are market-wide circuit breakers, but the SEC also provides ‘circuit breaking’ guidelines for different classes of individual stocks. Typically, will be halted if its price makes a 10% move within a 5-minute time period. Circuit breakers help market participants to literally take a breather, but critics believe it helps create artificial disruption and goes against the spirit of . A recent application of circuit breakers was witnessed twice in March 2020 when investors were concerned about the business and economic consequences of the global coronavirus pandemic.
Evidently, the Black Monday crash brought about many reforms which have helped to limit or prevent major damage during crisis periods.
Unless the FED is packed with Republican "moles" ... I'm STILL learning on this market getting turned around in October sometime to have it look like all rosey with being long again by election time.
But if Powell is a Republican "mole" ... then maybe the market/s WON'T get turned around.
"One day at a time, sweet Jesus, is all I'm asking of you ..."
We'll see how it plays out ...
#SQQQ: SIX WEEKS TIL THE MID-TERMS....!
Ohhhhhhhhhhhhhhhhhhh the pain. "MOMMMMIEEEEEEEE! MAKE THE HURT GO AWAY!!!!!!"
ProShares UltraPro Short QQQ seeks daily investment results, before fees and expenses, that correspond to three times the inverse (-3x) of the daily performance of the Nasdaq-100 Index®.
Invesco QQQ holdings as of May 7, 2024.
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