Will Today Be Black Monday? Maybe. (Whatever.)

There's an old saw in the stock market about how the trend on Friday sets the stage for what happens on Monday. The theory is that traders go home a bit giddy or nervous, and after 48 hours of ruminating on their condition, come back to work on Monday absolutely lathered up with fear or greed.

Statistically, this is probably a crock -- most old market saws are -- but then again, they don't call it "Black Monday" for nothing. For example, here's what happened in the days leading up to the biggest market crash in history, October 19th, 1987:

DJIA Closes Mid-October 1987:

Tuesday, October 13: 2,508
Wednesday, October 14: 2,413
Thursday, October 15: 2,355
Friday, October 16: 2,247
Monday, October 19: 1,739

Total Tues-Fri decline: 10%
Total Monday decline: 23%
Total 7-day decline: 31%

And here's what happened last week:

Tuesday, November 6: 13,667
Wednesday, November 7: 13,300
Thursday, November 8: 13,266
Friday, November 9: 13,043
Monday, November 12: ?

Total Tues-Fri decline: 5%
Total Monday change: ?
Total 7-day change: ?

So today could be rough. Or it could be a sucker's trap: a sharp morning panic followed by an afternoon rocket ride toward the moon.

Whatever happens today, ignore all the reassuring commentary about how "fundamentals are solid," "stocks are cheap," "lots of cash is on the sidelines," etc. Part and parcel of a market panic is a parade of experts reassuring everyone that everything is ok. Also part and parcel is that no one knows what will happen next -- so don't pay much attention to the doom-sayers, either.

The unfortunate truth is that the fundamentals aren't "solid" (checked out the financial industry lately) and stocks aren't cheap (record-high profit margins make P/E ratios look artificially low). But these factors will have little effect on short-term moves.

The best survival strategy? Make sure your portfolio is diversified, ignore the forecasts, and hang on to your hat.

Comments

[SamEllison]

Henry, the guy at the NYTimes, Hoyt(?) panned you pretty good Sunday and you work there. Dang!
Something just ain't right, WTI in the mid $90 and when the price goes up the markets are up, when oil goes down the markets are down. Sounds like a bubble, a futures bubble, as long as the prices rise and feeds the bubble everything is alright. When or if the price starts to drop a lot of people holding futures paper will get famous. For all the wrong reasons, eh?

[mmckinl]

hmmm ... ok ...

[themodernleader]

The market has been held up by the Fed with the American people's "almighty dollar" as the fall guy, that is, the loss of buying power of the American people. The needs of the millionaires and billionaires and their sycophants take precedence over the regular American citizens.
Tomorrow will come when the Market will meet its own level of a 60 percent draw down. Then the power of this era of predatory capitalism will have run its course and left the American Republic in rags and ruin.
Dangerous times lie ahead for self government and the rights of man.

[sparkandy]

Drat! Some rich people will lose a little money. I doubt if I'll sleep tonight, worrying about it.

[Changeizgood]

Don't get it, Stock Execs?
Messed with the wrong patriots.

Neglected us. Americans were invisible for so long, in your world. No longer desiring toys at risk of our health. You push lobbyist to deny us. In bed with cannibals of their own kind. We won't support the dogs that bite us, behind corporate doors.

Trusted you with our food and safety.

Work illegals, to short change, our dinner tables, while freezing from high heating and insurance costs.

We will survive the theft, but can you face the Justice of loss? Who's your buyer Daddy now? The people or that snake House member?

You need to get tribal sometimes, look out for your fellow man.

We don't care if you make money, but steal the very savings of seniors and middle class, with low loan interest rates to sucker them in.

We smell corrupt skunks, even if we don't have a PHD in BS

Black Monday, how about Black Tuesday,Wednesday, Thursday, and Friday.

A Middle Class Christmas is the expense of a credit card or and Poor's risk debt or utilities, to materialisticly give toys, instead of scripture & morals.

America isn't just bankrupt in their treasure, America is getting just as bankrupt in commons sense, intelligience and morals, before the world.

She represents torture. Like ruling classes of early England, when the poor wouldn't go along with just a potatoe in every pot.

WE get the potatoes, YOU, get the lamb?

Didn't your parents teach you to share.

Jesus shared Two fish and Five Loaves.

We all got full.
The American People will no longer look for CRUMBS underneath her own TABLE.

Can you deal with the Public's hunger for Justice.

Can you hold out?
The working class and poor have no membership.Exploiting the futures of our children?

Yeah, you F*@ked with the wrong Patriots.

You've been caught using blood for oil.
Will you freeze the Elderly like Enron, or throw out the poor like FEMA, after you've caused the biggest global disasters for the last twenty years?

Eat it!!!!!

PTTP!