is the djia setting up for a crash?
Is the DJIA Setting Up For a Crash?Iâ€™ll ever forget that phone call on Black Monday, October 19th 1987. I was in college and just starting to build an interest in the financial markets, however, a friend of mine was actively trading OEX options from his dorm room at a school acroDude! I did it, I did it, I nailed the big drop!â€ came the screaming voice across the pay phone line.What are you talking about,â€ I stuttered.May 22, 2008Iâ€™ll ever forget that phone call on Black Monday, October 19th 1987. I was in college and just starting to build an interest in the financial markets, however, a friend of mine was actively trading OEX options from his dorm room at a school across the country. â€œDude! I did it, I did it, I nailed the big drop!â€ came the screaming voice across the pay phone line. â€œWhat are you talking about,â€ I stuttered. â€œThe market has dropped over 500 points and my OEX teenies have gone up at least 50x, I now have my stake, I am dropping out of school and becoming a pro-trader in Chicagoâ€ â€œCool, Man. Good Luck,â€ I said before the line went dead. I know my friend was down to his last $10,000.00 from his Grandmotherâ€™s inheritance, losing most of it making these bets earlier, and prior to his big score. Needless to say, this story doesnâ€™t end well, due to lack of money management and continual need to make another big score.The last several days have given me flash backs to the 1987 crash. Are the markets setting up for another big drop, is it even possible? The market was ripping up in 1987, it had hit a new all time high just 8 weeks prior to the Black Monday. The Wall Street Journal stories lay out the massive change in sentiment. On 8/26/1987, the day after the 1987 market top, one quote read â€œIn a market like this, every story is a positive one, any news is good news. Itâ€™s taken for granted now that the market is going to go up.â€ Just 8 weeks later the day after Black Monday, â€œStocks Plunge 508, Amid Panicky Sellingâ€ appeared in the Journal. Those 8 weeks between the high and Black Monday are important to look at. There was a sharp sell off, then a rebound to near the high on the weekly chart, then the huge drop.Itâ€™s important to note that markets always tip their hand prior to a crash. The initial sharp sell off is what alerted my friend to the crash potential, along with other esoteric TA he studied.