What caused Fri, Oct 13,1989 10% correction?
wo...@direct.ca
day is still a new day for me as regards the economic cycle and
the stock market.
Marty Zweig says in his commercials on CNBC that every major stock
correction is preceded by some warning signs. Looking
back at my technical charts, it was easy to spot lots of warning
signs leading up to Black Monday, 1987 (e.g. bellweather
General Electric's stock chart pattern gave monster warning signs
for a full week leading up to that fateful day).
But looking at my charts, there were virtually discernable warning
signs that something was about to happen Oct 13, 1989. The stock market
skyrocketed up and peaked on Monday Oct 9, 1989 in a fashion
not unlike 1987. There was no initial failed rally, however.
The market fell modestly on Tuesday, fell 1% on Wednesday, fell
modestly on Thursday, and then BOOM...the market fell 10% on Friday.
Were investment-house computers programmed to spot another pattern
like Oct, 1987 and sell when the pattern was spotted? Was there some
unanticipated economic event (e.g. interest rates, oil price shocks).
If anyone has total recall about the events surrounding
that unfortunate day, I'd be grateful if you could E-mail me this
info. Kind thanks for any assistance you provide.
zn...@teleport.com
: I've only been investing in stocks for a 1.5 years, and so each
My recollection is that the "mini-crash" was triggered by some event /
announcement concerning the fundamentals of United Air Lines. This
stock was (and may still be) a component of the Dow *Transportation*
Index. The transport index dropped, and the Industrials and other stocks
followed suit. Of course, classical Dow theory holds that the Dow
Industrials and Rails (now Transportation) must confirm each other to
signal a change from bull to bear or vice versa.
Of course, it's easy for Marty Zweig or anybody else to predict
a crash in retrospect. For a more rational view of price
shocks, which are in fact unpredictable, and how to deal with
them, see Perry Kaufman's "Smarter Trading". There is a whole
chapter on managing price shocks. In a nutshell, when the price
shock is in your favor (for example, you went short on 12
October 1989), you close your position immediately and bank the
gift the markets have given you. If the price shock is against
you, you hold on (assuming you haven't been stopped out) and see
if there is going to be a recovery which will lessen your
losses. The example Kaufman uses is the dip after the Gorbachev
abduction: once events played out, much of the loss would have
been recouped if you had been in a position to hold on.
--
zn...@teleport.com (M. Edward Borasky) http://www.teleport.com/~znmeb
Q. Who invented the non-Von Neumann computer architecture?
A. John non-Von Neumann.
Y. D. Charlap
correction?>, 'wo...@direct.ca <wo...@direct.ca>' wrote:
>
>If anyone has total recall about the events surrounding
>that unfortunate day, I'd be grateful if you could E-mail me this
>info. Kind thanks for any assistance you provide.
>
and the general feeling that this signaled the end of the then on-going
takeover boom.
Y. D. Charlap
y...@nyc.pipeline.com
KLKevin
wo...@direct.ca <wo...@direct.ca> wrote:
>I've only been investing in stocks for a 1.5 years, and so each
>day is still a new day for me as regards the economic cycle and
>the stock market.
>
>Marty Zweig says in his commercials on CNBC that every major stock
>correction is preceded by some warning signs. Looking
>back at my technical charts, it was easy to spot lots of warning
>signs leading up to Black Monday, 1987 (e.g. bellweather
>General Electric's stock chart pattern gave monster warning signs
>for a full week leading up to that fateful day).
>
>But looking at my charts, there were virtually discernable warning
>signs that something was about to happen Oct 13, 1989. The stock market
>skyrocketed up and peaked on Monday Oct 9, 1989 in a fashion
>not unlike 1987. There was no initial failed rally, however.
>The market fell modestly on Tuesday, fell 1% on Wednesday, fell
>modestly on Thursday, and then BOOM...the market fell 10% on Friday.
>
>Were investment-house computers programmed to spot another pattern
>like Oct, 1987 and sell when the pattern was spotted? Was there some
>unanticipated economic event (e.g. interest rates, oil price shocks).
>
>that unfortunate day, I'd be grateful if you could E-mail me this
>info. Kind thanks for any assistance you provide.
>
I remember the day. There were a bunch of leveraged buy out deals on tap, and
there was a lot of credit out there for bridge loans (remember Drexel and
Shearson?). Martin Davis was bidding something over $200/share for United Air
Lines, and he announced he could not get the financing to pull the deal off.
At that time, all the other pending deals collapsed as well, and signaled a
very tight credit situation for the next few years.
Arch Crawford
I mentioned on my Hotline that the market would probably be down Fri-Mon
because of a SUPERMOON on Sat. night. That is, a New or Full Moon which
is coincident with the Moon's Perigee (closest point to the Earth). These
unique events are often associated with sharp market moves, weather
changes and Earthquake activity - in this case the San Francisco Quake
the following Tuesday which was predicted by these methods by Dr. Ibn
Browning a month in advance. Watch the high Tidal Forces for large, quick
movements in stks.
Arch Crawford
S Krueger
writes:
[snip]
>Of course, it's easy for Marty Zweig or anybody else to predict
>a crash in retrospect.
What a cheap shot! Marty Zweig predicted the big dip publicly, on WSW,
just days before the crash, saying it would be steep, it would be
deep, but that the market would recover in the medium term. If that's
not good enough for you, then you're in the wrong business.
I would argue that such a bold pronouncement from a well-respected
analyst may have been the last straw for many who were hoping to ride
that speculative bubble a bit higher.
Happy investing.