After Monday’s 500+ drop in the DOW the news referred to the move as “Meltdown” of the stock market. While a 500 point drop is concerning it is by no means a meltdown. To date the market has fallen 3300 points since it made a record high almost 1 year ago. Let’s take a look at a real melt down and compare it to Monday’s price action.
On October 19, 1987 the DOW fell 508 points from the previous day’s close. This was after it had already fallen 500 points from the record high created on August 25, 1987. Add that to the drop of October 20, 1987, the DOW gave up 1,131 points in just over a month.
Looking at the raw numbers is would appear that our current Bear Market is indeed more sever then the crash of 87. However, if we put these numbers into context we will see a more accurate picture.
Monday’s drop of 504 point came after the previous day’s closing price of 11,421.99 resulting in a drop of 4.4%. Today as of 9:45 the DOW had reach a low of 10,660.31 having given up 3,620 points or 25.35% in just under 11 months.
On August 25, 1987 the Dow Jones Industrial Average reached a high of 2,746.65, a new record. On October 20, 1987 the DOW reach a low of 1616.21 having given up more than 41% of its market value in less than 60 days. The 508 point drop which occurred the previous day accounted for a 22.6% drop in 1 day.
Recall from my article almost 1 year ago, I pointed out that the Bernanke would attempt to prevent the market from “melting down” and instead would do what he and the FED could to have a more orderly market correction. So far he has been successful.
So what is the point of this long dissertation? Well, as Curley said in the movie City Slicker when ask “Hey Curley, have you killed anyone today”. Curley responded “The day ain't over yet” And either is this Bear Market.
Price action for all the major indexes continues to break critical support levels on the weekly, daily and intraday time frames. In addition the technicals continue to show considerable weakness.
While the market has not melted down by 1987 standards, in the last 15 minutes of today’s trading, the DOW broke intraday support and closed at 10,609.66 having given up 449 points for the day. The market may not be “melting down” but things are heating up.
At least for now “Cash is King”. The dollar has reversed and is gaining strength against the major world currencies (although a correction is overdue). This strengthening, should it continue, will ultimately lead to lower inflation.
Bob
On October 19, 1987 the DOW fell 508 points from the previous day’s close. This was after it had already fallen 500 points from the record high created on August 25, 1987. Add that to the drop of October 20, 1987, the DOW gave up 1,131 points in just over a month.
Looking at the raw numbers is would appear that our current Bear Market is indeed more sever then the crash of 87. However, if we put these numbers into context we will see a more accurate picture.
Monday’s drop of 504 point came after the previous day’s closing price of 11,421.99 resulting in a drop of 4.4%. Today as of 9:45 the DOW had reach a low of 10,660.31 having given up 3,620 points or 25.35% in just under 11 months.
On August 25, 1987 the Dow Jones Industrial Average reached a high of 2,746.65, a new record. On October 20, 1987 the DOW reach a low of 1616.21 having given up more than 41% of its market value in less than 60 days. The 508 point drop which occurred the previous day accounted for a 22.6% drop in 1 day.
Recall from my article almost 1 year ago, I pointed out that the Bernanke would attempt to prevent the market from “melting down” and instead would do what he and the FED could to have a more orderly market correction. So far he has been successful.
So what is the point of this long dissertation? Well, as Curley said in the movie City Slicker when ask “Hey Curley, have you killed anyone today”. Curley responded “The day ain't over yet” And either is this Bear Market.
Price action for all the major indexes continues to break critical support levels on the weekly, daily and intraday time frames. In addition the technicals continue to show considerable weakness.
While the market has not melted down by 1987 standards, in the last 15 minutes of today’s trading, the DOW broke intraday support and closed at 10,609.66 having given up 449 points for the day. The market may not be “melting down” but things are heating up.
At least for now “Cash is King”. The dollar has reversed and is gaining strength against the major world currencies (although a correction is overdue). This strengthening, should it continue, will ultimately lead to lower inflation.
Bob
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