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Trading Any Market

1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned

Stock-Markets / Stock Market 2017 Oct 19, 2017 - 03:56 AM GMT

By: Nadeem_Walayat

Stock-Markets

It's that time of the year again when the stock market doom merchants are at their most vocal as they focus on the historic apex of the darkest day of the darkest month for stocks of the year, October 19th, the 30th anniversary of the 1987 Black Monday that saw the stock market crash by an unprecedented 22% in one day that few saw coming but ever since many prophesise the repeat of each October, regardless of what the stock market has actually done thus far each year as the perma bear crowd can always be seen literally jumping up and down like demented rabbits proclaiming that a crash is once more imminent, pointing to a myriad of harbingers of the imminent stock market apocalypse. Against which the historic record paints a picture of a coin toss having proved infinitely more accurate than the perma crash is coming calls awaiting their broken clock moment to proclaim their success.


So it is no wonder that October tends to be an unusually irrational month for stock market expectations, and even more so for this year given that the Trump inspired delusional rally has relentlessly risen in the wake of Fed tightening and harbingers of a REAL NUCLEAR APOCALYPSE as I have covered at length in my Trump Reset War With China series.

Trump Reset: US War With China, North Korea Nuclear Flashpoint

In respect of which the Chinese Emperor Xi Jinping's latest statement made in front of 5000 communist party members effectively laid out the blue print for what to expect from the emerging Chinese economic and military global empire. So the trend that I warned of near a year ago is most definitely still in motion as the worlds existing empire, the United States and the emerging Chinese Empire are heading towards inevitable conflict that will probably turn nuclear where the North Korea saga of recent months is just one side show consequences of.

For more on the "Trump Reset - War with China" mega-trend see my following 3 articles -

How to Successfully Trade a Stock Market Crash

I am sure that the 30th anniversary of the stock market crash will keep many readers busy reading reams and reams of garbage produced by those who were never there in the first place. And for the few who were there, never traded the stock index futures on that day, and for those who were active market participants were like 99% of the traders on that day paralysed by fear into a state of inaction. That leaves perhaps a mere handful who both saw the crashing coming, then traded it, and most importantly profited from it, as Trump would say beating it badly.

In which case watch my video for what happened in the run up to and on the day of the great crash of 1987, of how I managed to for see, trade, and and beat the 87 crash that provided very valuable real world trading and investing lessons that are just as valid today as they were 30 years ago!

https://youtu.be/epi2TtnfkCA

The Greatest Investing Lesson Learned In the Aftermath of the 1987 Crash

So once more the doom merchants are peddling their perma wares despite the fact that even if this time stocks do by chance crash, that EVERY crash in the general stock market indices such as the Dow, S&P and FTSE have always resolved in the mother of all buying opportunities. That is the KEY LESSON learned in the aftermath of the 1987 crash. For following the crash there was widespread prevailing perma doom! And it did not just persist for a few weeks, or a few months but for a good 9 years! That's NINE YEARS OF PERMA-DOOM in the face of a relentless bull market that climbed a wall of worry which long since passed it's 1987 PEAK. All the way to Dow 6000 and beyond as the following chart illustrates -

This is why for THIS 9 year old bull market I have consistently iterated that where the general stock market indices are concerned "the greater the deviation from the stock market high, then the greater the buying opportunity presented". Which is the primary lesson learned in the years that FOLLOWED the 1987 Crash.

Which is why I love Black Mondays! When others are panic selling, my minds on what to buy.

However, there is a downside to this mind set which this year illustrates. For I had concluded that a lunatic in the White House would present fellow stock investors with such an ideal buying opportunity, a significant deviation from the bull market high. So having reviewed the technical's, I penciled in with a fair bit of confidence for upto 20% deviation from the bull market high during 2017. Unfortunately, such a buying opportunity has failed to materialise, which is the nature of the beast, for the market isn't going to give away easy money, you have to work for it! And unfortunately distracted by Brexit and Trump I clearly failed to work hard enough to understand what the market was trying to tell me were its intentions for 2017.

It happens, when one spreads oneself thinly i.e. focused on first Brexit and then Trump instead of stocks, then the market won't be forgiving for being distracted, at least the pain has been one of missed opportunity rather than suffering depreciating account balances that I assume must have been the fate of the perma-bears this year, that is IF they ever put their money where their mouths are!

So yes, 2017 has been a disappointing year as the anticipated buying opportunity never materialised. So i got this stage of the this mega-trend stocks bull market wrong for 2017. However, so that there is no confusion, we remain in an exponential mega-trend stocks bull market courtesy of the key mega-trend drivers that look set to drive the general stock indices into the stratosphere as I have covered over many years such as the inflation mega-trend and my more recent series on Machine Intelligence investing articles and videos as my first video in this series illustrates:

And where trading is concerned, I aim to create 2 videos that will cover the real secrets for successful trading and investing, so ensure you are subscribed to my youtube channel and free newsletter for notification of these.

Your analyst missing boring Obama which allowed one to focus on market analysis and concluding trend forecasts rather than politics or the chances for a nuclear war!

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2017 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

HarrisD
24 Oct 17, 04:03
No US Stock Market Crash on the Horizon

Dear Nadeem,

Fear not, there is no threat of a crash at this time. We may see a controlled 20% to 30% drop in the US markets in coming months, but a crash is unlikely. We might even see a flash crash occur that follows a typical waterfall drop in the indexes, but not a full blown "22% in one day" crash.

The market conditions now are quite different from the market conditions that existed in October 1987. Back in 1987 the US stock market was in a bubble. The US indexes back then (in particular the DJIA) had started to grow exponentially, and this is the hallmark of a bubble. In fact, the DOW in 1987 was growing in the same fashion as it did in 1929, and we know what happened back in 1929. The exponential growth in the DJIA, through the late 1920s, led to a huge bubble that popped and led to the US Great Depression. Remember, exponential growth always leads to a bubble, and bubbles always crash. All you have to do is search for exponential growth to predict when a crash will happen.

Stock markets in Argentina and Venezuela are both growing exponentially and they are therefore each in a bubble. Also, a bubble is starting to form in Brazil, but its in its infancy at the moment and may not have time to fully form. The reason for this, is that soon Argentina and Venezuela will pop and crash and that might happen before Brazil can fully form into a bubble.

My current prediction is that the 2009-2017 stock market rally here in the US will continue until year-end, and that a top is likely to form between January 1, 2018 and July 31 2018. I already have a series of key market signals that indicate a US stock market top is close, and I am waiting for a few more to form. By the end of this week (Oct 27) the Russell 2K index should provide us with its market top signal, joining the DJIA, S&P 500 and the NASDAQ Composite.

The DJIA gave us its stock market top signal in June this year (2017), and the average time from signal to top is usually about 9 months. That gives us a marker around the end of March 2018, right in the middle of the Jan 1 to July 31 window I have just provided.

I'm waiting for one more key signal to occur with the DJIA before the US stock market top falls into focus. Its looking like we might have a Santa rally into year end, but next year could be quite tricky!

Cheers,

David


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