The Daily Forex

Wall Street Throws Mini Anniversary Party For Its October Demons

On Monday, in "If the Market Tanks This Month, Here’s Why", I noted that this month marks the 10th anniversary of the mini-crash of ‘97, the 20th anniversary of the crash of ‘87, and some incalculably high-numbered anniversary of the crash of ‘29.  Today, in fact, is the actual anniversary of Black Monday when the Dow shed more than 20%.

I also noted that, despite the tradition, we weren’t poised for a similarly panicky October this year, based on the relative modesty of the broad market’s current valuations and the fact that echoes of panic aren’t a good enough reason to trigger an otherwise unjustified plunge.

Well, the week turned out to be an ugly one, with the Dow falling almost 500 points.  Today alone, the average sank 369 points, enough to trigger the so-called "trading curbs" that limit programmatic trading.  On Black Monday, the dow plunged just over 500 points, but it’s worth remembering that the corresponding percentage decline was more than 22%.  This week’s 500 point decline, inflicted over the course of 5 consecutive down days, amounted to just over 4%, leaving the Dow still up 8.5% year-to-date and within 4.5% of its all-time high.

What’s more, this week’s declines were neither panic-driven nor panic-exacerbated, unlike the crashes celebrating anniversaries this month.  Oil has pushed to all-time nominal highs, the third quarter earnings season kicked off with a handful of disappointments, and housing and credit market worries continue to worry - none of which are sufficiently dreadful to fundamentally alter the economic outlook, but all of which are well-equipped to batter stock prices around for a few days.

Plus, there’s probably just a smidge of panic.

But we’d need to cram 5 weeks like this one into a single trading session before we have to start keeping an eye on traders fiddling with window latches.

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