Whenever the stock market closes lower on both Thursday and Friday of options expiration, it's a short-term danger sign for the first 1-2 days following expiration. Those of you who've been around for some time probably remember the '87 crash. What you may not remember is that the market was headed sharply lower during the week preceding the crash, and that the crash occurred on the day right after options expiration. Below is a list of all instances over the past fifteen years in which the S&P closed down on both Thursday and Friday of options expiration. Note that in the majority of cases, the S&P posted another lower close (below Friday's level) within two sessions... 07/22/02 - ??????? 06/21/02 - Lower close 02/15/02 - Lower S&P close on Monday 09/21/01 - No lower close 06/15/01 - Lower S&P close on Monday 12/15/00 - Lower S&P close on Tuesday 09/15/00 - Lower S&P close on Monday 05/19/00 - Lower S&P close on Monday 02/18/00 - Lower S&P close on Thursday 01/21/00 - Lower S&P close on Monday 05/21/99 - Lower S&P close on Monday 08/21/98 - Lower S&P close on Thursday 06/19/98 - No lower close 05/15/98 - Lower S&P close on Monday 12/97/97 - Lower S&P close on Tuesday 10/17/97 - Lower S&P close on Friday 07/18/97 - Lower S&P close on Monday 02/21/97 - Lower S&P close on Thursday 02/16/96 - Lower S&P close on Monday 12/15/95 - Lower S&P close on Monday 08/18/95 - Lower S&P close on Monday 01/20/95 - Lower S&P close on Tuesday 11/18/94 - Lower S&P close on Monday 10/21/94 - Lower S&P close on Monday 04/15/94 - Lower S&P close on Monday 02/18/94 - Lower S&P close on Wednesday 09/17/93 - Lower S&P close on Monday 07/16/93 - Lower S&P close on Thursday 05/15/92 - No lower close 08/16/91 - Lower S&P close on Monday 04/19/91 - Lower S&P close on Monday 08/17/90 - Lower S&P close on Tuesday 04/20/90 - Lower S&P close on Tuesday 12/15/89 - Lower S&P close on Monday 08/19/88 - Lower S&P close on Monday 10/16/87 - Lower S&P close on Monday In 31 of the past 34 occurrences, or 91% of the time stretching back to 1987, the S&P has closed below Friday's level within one week. And in roughly 75% of the cases the S&P posted a lower close within two days, with the most likely day for a selloff being Monday.
Regarding your historical data points, I wish I could have more faith in them, but I can't. The reason is that I use data points using sentiment indicators such as the Tick and Vix. I can tell you for the past month, these indicators have been stretched more than I would ever have thought possible. I mean the odds of a rebound earlier in the month according to historical data was quite high, but here we are. Towards the end of the month, and we are seeing new market lows. So same goes for bearish or bullish arguments using historical data points I believe. We are being stretched both ways, so while those data points could be flashing buys or sells, they could still be off by 20% in this whacky market. Regarding the October 87 crash, I believe most crashes take place due to a snow ball effect of profit taking, or due to the most unlikely events (ie. 9/11), mutual fund redemption not being an unlikely event as they occur all the time albeit in various waves. In October 87, the market was up 20% on the year when it crashed. And it was after a 5 year bull run of 150%. In contrast, we're virtually at a 5 year low and already down more than 20% on the year. Wheres the profit? Most people are numb by now. Look at SUNW, everyone was saying how "cheap" it was at 10. And everyone held on thru the pain. AOL. "Cheap" at 28. People hold on mindlessly. Whos to say they wont do the same when it slowly gets cut in half again. The ones with the itchy trigger finger are those with profits. But we're already down so much. Gotta love these discussions...
today i had an interesting experience.. i waited in line for 2 hours going through the border checkpoint from Ontario to New York and when i finally got to the booth with the border guard he asked me what i do for a living.. when i told him i was a futures trader, he totally forgot about the 2 mile line of cars behind me and started a 15 minute conversation about how his dad lost 20k in his tech fund and how hes taking all his money and putting it into CD's.. then again, maybe he talks stocks to everyone and thats why i had to wait 2 hours.. -qwik
Besides the media, has anyone heard stories from individuals this weekend regarding the market? It would be interesting to hear what the psyche of the average Joe is at this point.
Go to reuters.com right now and check out the article on 410ks....by some dumbass reporter. One point of advice is to hold on to your stocks because it is too late to sell....Jesus, with advice like thism no shit people are sleeping in cardboard boxes...