Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

The Day the Stock Market Shook the Earth: Takeaways From the Dow’s 1,000-Point Drop

Stock-Markets / Stock Markets 2015 Aug 30, 2015 - 06:09 PM GMT

By: Investment_U

Stock-Markets

Matthew Carr writes: I was working from home that day.

My wife had just had surgery, and I was caring for her as she recovered. I was sitting in our main floor living room, answering emails. My wife was on the couch downstairs, watching TV.

All of a sudden, our dog Chloe came running into the room. She jumped up on the couch next to me and started licking my face. Seconds later, the house started shaking.


There was a low, thundering rumble. My wife called, “Is it just the drugs? Or is the whole house shaking?”

I yelled, “Earthquake!” grabbed her and ran outside into the yard. This was August 23, 2011.

I’ve lived in a lot of different parts of the country, including California. But I’ve experienced only two earthquakes. And they were both in Maryland.

This particular earthquake wasn’t devastating by any means, but it was still unnerving. After all, we're not supposed to have earthquakes here. It frayed people’s nerves. There was even a big momentary drop in the share price of East Coast power plants that day.

Yesterday, almost four years later to the day, the Earth shook again. Only this time, even more nerves were rattled... because this quake originated from the market, with an epicenter on the other side of the world...

The New Black Monday?

Remember Black Monday? I’m talking about October 19, 1987, when the Dow Jones Industrial Average lost 22.6%.

A whopping 508 points.

Yesterday, the Dow opened down more than 1,000 points after Chinese markets collapsed 8.5%. The panic was swift and widespread. The Nasdaq opened down 9%. Tech stocks got obliterated.

If you were a day trader, yesterday was a gift. And if you got in early - when the bleeding was the heaviest - you were up substantially by lunchtime.

For everyone else, Monday was frustrating, if not insane. The destruction was early... and momentary. The intraday spreads on some stocks bordered on criminal.

An hour after the opening bell, my officemates and I found ourselves saying silly things like, “Hey! We’re only down 500 points!”

On any other day, being down 500 points would be concerning. But yesterday was just plain ridiculous, trending toward absurd. It felt like the heaviest pressure - which took place early - was simply a ploy to take out the little guys... to trigger stops, buy large chunks at lows and profit.

As the morning wore on, the mood in my office turned from playful to sour - I’ll admit, more than one expletive was uttered - as we dove into various stocks, in complete awe of the spreads.

For instance, Apple (Nasdaq: AAPL) hit a 52-week low of $92 in early trading. Then, by 11 a.m., it was down only modestly, sitting above $104.

Skyworks Solutions (Nasdaq: SWKS), one of my favorite semiconductor stocks, tumbled to $70.87. But it was back in the green by 10:30 a.m., up 3% and surging as high as $84.80.

From low to high, that was a gain of 20%.

Biotechs had some of the most ridiculous moves of all. Tetraphase Pharmaceuticals (Nasdaq: TTPH) hit a low of $27 at 9:37 a.m. It was down 34.3% from where it closed on Friday. By 9:44, it was at $36.72.

By 10:30, it was at $39.82. That’s a gain of 47.5% off the morning low.

Stick to Our Principles

The real negative on days like Monday - when the wounds seem deep at first but ultimately turn out to be nothing but scratches later in the day - is that stop losses and trailing stops are questioned.

Just like during the “flash crash” in May 2010, stops were triggered yesterday, pushing investors into cash. Reader Brian commented, “The market gapped down, my positions liquidated, then the market corrected (within minutes)... I think you should address this issue with your readers ASAP. I am SURE I am not the only one who took this hit today.”

There’s no denying it: It does stink when something like this happens. But what you need to understand is that Monday was historic. It’s extremely rare that the Dow opens down nearly 1,100 points - then ends the day in the red a more digestible 400 points.

Protective stops - whether you’re using a trailing stop or a hard stop - are there to take emotion out of the equation. To protect yourself from a market disaster. And in the vast majority of cases, they will work in your favor.

But in rare moments like yesterday, stops may get hit that you’ll lament.

August Is a Grump of a Month

Yesterday, we had one of the largest single-day losses ever. Combine that with Friday’s 530-point drop - which ranks among the top 10 moves lower - and you have a lot of investors understandably on edge.

But let’s think about August 2011, the same month as that legendary earthquake that shook my house.

On August 4, 2011, the Dow lost 512.76 points...

Four days later, on August 8, 2011, it tumbled 634.76 points...

And on August 10, 2011, the Dow lost another 519.83 points.

Out of the top 20 largest daily point losses in the history of the market, six have happened in the month of August. (That’s 30% of all historic collapses.) Four took place in September. Five happened in October - including Black Monday. And three were in November.

The remaining two? April 14, 2000, and December 1, 2008. We data junkies call those “outliers.”

Over the last six years, August has earned a reputation as a notoriously volatile month. Because, in addition to all those drops, two of the largest point gains in history were on August 9, 2011, and August 11, 2011 (the days after historic one-day collapses).

It’s all right to be nervous. And if you were stopped out of some plays prematurely on Monday, you have my sympathy. But as I said, this was an extremely rare occurrence. It doesn’t negate the fact that you must protect yourself and be disciplined.

If anything, now is the time you should be hunting for opportunities, zeroing in on those companies that are oversold.

Good investing,

Matt

Source: http://www.investmentu.com/article/detail/47249/day-earth-shook-lessons-from-dow-1000-point-drop#.VeMpNk3bK0k

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules