"Quote from JSL_Capital: With all these seers, prophets, witch doctors, psychics etc., Elite Trader is looking more and more like the yahoo mb it is his opinion. i am sure there are parts of ET which he finds useful. furthermore the level of literacy is also trending towards a yahoo mb. if was him i would just ignore this particular thread.
semis are breaking support. They havent led in this market rally yet. Transports are also breaking down, might pick up some IYT below 80
New York Times - - no spin. Just facts from the time of the event. October 25, 1987 ANSWERS TO BASIC QUESTIONS ABOUT THE COLLAPSE By KYLE CRICHTON LEAD: LAST Monday's stock market collapse left everyone from taxi drivers to professional analysts confused and groping for explanations. What follows are preliminary answers to some basic questions about what happened. Q. Why did the market plunge? A. The theories vary widely - from investor concern about America's huge budget and trade deficits to growing evidence that President Reagan has entered the lame duck period of his Administration. LAST Monday's stock market collapse left everyone from taxi drivers to professional analysts confused and groping for explanations. What follows are preliminary answers to some basic questions about what happened. Q. Why did the market plunge? A. The theories vary widely - from investor concern about America's huge budget and trade deficits to growing evidence that President Reagan has entered the lame duck period of his Administration. As with most great panics, the market's dramatic drop was most likely precipitated by a convergence of economic and political doubts. Q. Why did all of this come to a head on Monday? A. The downturn began to gather momentum in the week before the big drop, when the Dow lost a stunning 235 points, including 108 points on Friday, Oct. 16. Obviously, investors were already quite nervous about economics and politics. Then, last weekend, they had a chance to contemplate Treasury Secretary James A. Baker 3d's harsh criticism of West Germany for raising interest rates. Mr. Baker's rare public display of pique alarmed investors not just because he threatened to drop the dollar further - which raised the specter of interest rate hikes - but also because it indicated a breakdown in international cooperation on economic problems. The Persian Gulf conflict added to the climate of uncertainty. Investors were probably also unnerved on Monday by news that the Tokyo stock market had plunged early Monday morning in response to the Dow's drop the Friday before. Q. Why would trade and budget deficits help trigger a panic? A. Investors fear that the stubborn trade deficit might provoke a further fall in the value of the dollar. A drop in the dollar may spur American exports, but it also necessitates higher interest rates, since the United States must attract foreign investment to Treasury securities to finance the budget deficit. If the dollar drops dramatically, interest rates would get high indeed. And this, investors reason, would almost certainly usher in a recession - by dampening business investment, home construction and consumer spending. What's more, high rates would draw money out of the stock markets and into investments such as money-market funds and certificates of deposit. Q. But isn't Washington working with other nations to improve the trade picture while stabilizing the dollar? A.The Louvre accord reached in Feburary by the Group of Seven nations - the United States, West Germany, Britain, France, Italy, Canada and Japan - was meant to help stabilize the dollar. Under its terms, Japan and West Germany have agreed to lower their interest rates and stimulate their economies so their consumers can afford more American exports. In return, the United States agreed to work to cut its budget deficit and support the dollar at its current level; a lower dollar would hurt the export led-economies of Japan and West Germany. But the Louvre Accord has not been entirely successful. While the dollar has stabilized, America's trade imbalance has failed to improve. Some analysts believe the dollar will have to fall another 20 to 30 percent. If the currency falls by that much, interest rates will have to rise mightily to keep foreign investors interested in Treasury securities. Q. How did the President's lame-duck status affect events? A. Despite the mounting trade and budget deficits, the markets had demonstrated faith in the Reagan Administration's economic leadership. But the Senate Judiciary Committee's recent rejection of Judge Robert H. Bork as a Supreme Court nominee was interpreted as a sign that this leadership is failing. This not only added to the climate of uncertainty - deadly for financial markets - but also raised the possibility that President Reagan might lack the clout to resist pressure from Congress for protectionist trade legislation. The protectionist Smoot-Hawley tariffs of 1930 are widely viewed as the last in a series of missteps that triggered the Great Depression. Q. By most accounts, investors lost more than $500 billion Monday and $1 trillion since the market peak. Where did the money go? Did it ever really exist? A. The billions lost by investors did not, of course, exist in a physical sense - the amount simply represented unrealized gains in the value of stocks as determined by the marketplace. As ''real'' money, then, the $500 billion never existed. In the psychological realm of wealth, however, the $500 billion was very real, and its loss almost certainly will be felt. Deprived of the prospect of one day cashing in those gains, investors will be less likely to spend as freely as before. As a result, many economists are cutting their growth forecasts by 1 to 2 percent for the year ahead. Q. Does the collapse of stock prices mean that a recession is inevitable? A. No. If there is a positive aspect to the collapse, it is that it might force Western and Japanese governments to take steps to help the international economy and work to correct trade imbalances. West German officials agreed Monday to lower short-term interest rates and to pursue a somewhat more stimulative monetary policy. Also last week, President Reagan softened his harsh rhetorical stance against any and all tax increases and agreed to negotiate with Congressional leaders on ways to ease the Federal budget deficit. Still, many analysts expect the shocking collapse to scare consumers away from major purchases, and a prolonged slump in consumer spending would greatly increase the likelihood of a recession. Moreover, market peaks have presaged each of the last 10 postwar recessions - usually about six months before the downturn. With the Dow having fallen 36 percent between late August and Monday, it would take a rugged optimist to deny that a peak has occurred. The key element to look for in coming weeks is real progress in relieving world imbalances. This will entail substantial cuts in the American budget deficit, further measures to stimulate growth in Japan and West Germany and interest-rate cuts in all three nations. If the spirit of cooperation, rekindled in the shadow of Black Monday, should fade with a ''return to normalcy,'' a recession will become more likely. Q. Even if a recession is not on the way, does the collapse signal the beginning of a bear market or just a ''correction'' in the bull market? A. When analysts speak of corrections, they generally mean stock market declines of at least 10 percent, spaced over a few weeks or months. An overall decline of 36 percent, including 22.8 percent in one day, as the Dow has just suffered, is quite another story. But the bull's life could be prolonged by the right policy response. Low inflation and declining interest rates created the bull market. Inflation and high interest rates will kill it. In this regard, it was a good sign for the stock market when the Federal Reserve Board's chairman, Alan Greenspan, greatly loosened the strings on the nation's money supply after the market plunge. Looser money, means lower interest rates, which is bullish for stocks. History is not kind when it comes to major drops in the Dow, however. If there is any pattern, analysts say, it is for a great drop to be followed by partial recoveries that give way to further falls. And the common tools of securities valuation - price/earnings ratio and the dividend yield - both indicated a vastly overvalued market this summer, when the Dow topped 2,700. Q. Did computerized stock trading - program trading - play a role in the collapse? A. This question will be debated for some time - in Congressional hearings in coming weeks, by the Securities and Exchange Commission, by the new Presidential panel and elsewhere. The discussion is likely to focus on the role of stock index futures or options - hedging instruments that allow investors to trade in a market or industry group without buying individual stocks. In program trading, huge blocks of stock are traded in an attempt to profit from the difference between the price of index futures and the actual cash value of the stocks that make up the index. While index futures are supposed to move up and down with the stocks that make up the index (such as the Standard & Poor's 500), they sometimes get a little ahead or behind, creating opportunities for the program traders. In the process, critics say, program trading magnifies market swings, and very quickly, too, by driving the index up or down - whichever tendency got the process started. To further complicate matters, critics also complain about the interaction of program trading and another sophisticated hedging technique involving stock index futures - portfolio insurance. Once stocks began to fall steeply Monday morning, they say, portfolio insurance programs kicked in, selling stock index futures. The heavy selling depressed the prices of index futures, creating opportunities for program traders to buy the futures and simultaneously sell the underlying stocks. This, some analysts say, further depressed stock prices. I shortened it
very well could be a black monday with the dow sitting on a massive neckline of a huge head & shoulders on the 60 min & daily...............PPT will have their sleeves rolled up for sure.
for DOW & S&P to be down hard.... it usually needs the support of energy .... i.e. oil ... to be shooting up, and i don't see that happening anytime next week. Infact i think oil will drop next week.... thus not having the impact to really drop the other indices. This is just my opinion.