Black Monday? Bull Monday?

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...
 
Originally posted by DisciplinedHedg
Cannot imagine what the average Joe is thinking...

...its quite sad actually. 401k's were pushed aggressively for the past 5 years, and whatdya know. We've given back almost all the gain for the past 5 years.

And the average tech and mutual funds are seeing double digit losses for every quarter this year.

Its just too tough to fight so much downward momentum (the dollar, SEC investigations everyday, etc).

For the past month, I've heard several stories about people pushing back their retirement. Thats a step in the right direction. You can't have the best economy in the world if everyone retires by 35.

During the bubble, you had grandmas and barbers giving stock tips. I would say the equivalent would be those "amateurs" saying screaming yelling they will never invest another penny in their lives.
More...

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.. :D

-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...
 
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