History is supposed to rhyme, not repeat, but market action Friday was eerily similar to Black Thursday, ‘29, the first day of full-on panic.
If the whole thing plays out like ‘29, we close up 3% tomorrow (exactly where futures are), then crash Tuesday and Wednesday by 10%+ each day, then rally 19% Thursday and Friday and crash to new lows by the end of the month.
Whatever happens, it won’t be boring.
- Tags: crash, crash of 1929
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Brian
October 13th, 2008 at 2:35 pm
Hello Mike,
Any last-minute revisions to your prognistication for the week? It amazes me the way the population of investors and traders can swing in such a polarized fashion. I would be interested to hear someone explain to me how we’ve gone from “world collapse” last week to “everything is right with the world” today. Of course, I jest - I’m sure there will be plenty of bad news on the horizon. But given the strength of the move today, I wonder if it will be sustained for at least another day or more? My friend and I were just discussing our plans for repurchasing Inverse ETNs and other, similarly contrarian positions - trying to decide if we should buy in today. Our initial consensus is that it might be better to wait and see if some more weakness shows up over the next few days. I would tend to think that the day of (or immediately proceeding) the next, significant decline should so a bit more uncertainty - via intra-day volatility. It seems unlikely (although I could be wrong) that a day that is so solidly positive could be followed immediately thereafter by fall of a proverbial cliff.
Kind regards,
Brian
Mike
October 13th, 2008 at 2:49 pm
I’m no technician, but the strength today does suggest that we are in Elliott Wave 4 and that 3 finished at the lows Friday AM.
I’m not trading these moves, just observing them. I sold tons of puts the last 2 weeks, and the rest expire in 2010, so I am just going to be patient. No need to get too cute with trading.
Mike
October 13th, 2008 at 3:36 pm
Update: At 3 min to the close, up 11%, I couldn’t resist nibbling on some short-term SPY puts. But this is play money. My real money doesn’t care what happens between now and 2010, so long as there is still a market by then!
Above 10,000, I would buy back some of the puts I sold last week.
In ‘29, we had a bigger rally than this just before hitting the lows of the crash (not the final lows for the Depression — those came two and a half years later).
Who knows? It’s just fun to watch.