The present is just like October 1987.
Updated
The underlying conditions?
Over the last several weeks, we've had a rapid increase of value in equities, volume as a result of primarily retail volume. This past thursday, CBOE recorded 68 million contracts traded - an all time record in volume. There will be a hangover from the gamma squeeze, one which is unprecedented. The market makers were forced to hedge the call options by purchasing stock, hence the last several weeks rally. The record number of ETFs, insider selling and "weak handed" retail will result in forced selling as market makers release their hedges. The underlying conditions of the quickest interest rate risingcampaign, and slowest to pivot, will result in just yet another crash.
Over the last several weeks, we've had a rapid increase of value in equities, volume as a result of primarily retail volume. This past thursday, CBOE recorded 68 million contracts traded - an all time record in volume. There will be a hangover from the gamma squeeze, one which is unprecedented. The market makers were forced to hedge the call options by purchasing stock, hence the last several weeks rally. The record number of ETFs, insider selling and "weak handed" retail will result in forced selling as market makers release their hedges. The underlying conditions of the quickest interest rate risingcampaign, and slowest to pivot, will result in just yet another crash.
Note
The support broke today, only need five more trading days to replicate the stock market crash of October 1987. One of these days will be the largest drop in stock market in a single day either surpassing Black Monday, October 19, 1987 by largest % or largest daily point on indices on March 16, 2020. I reckon it will be Thursday, March 2, 2023 - the largest single drop in indices in both categories - percent and by daily point losses.Note
I've been wrong on timing, but I still believe we are only days away. The difference between 1987 and now, is that today, we have a market contagion with SVB. Similar to Enron in dotcom and Lehman bro's in 2008. That's a catalyst. In those last moments of 2008, it only took about 3 weeks for indices to drop 30% or greater. In regards to correlation to 1987, it still remains completely strong with a 97% correlation when you compare the last 105 trading days between the present and the past. DJI retraced 50% from it's climb from "October Lows" in 2022. This will accelerate in the coming trading days, if not the incoming weeks.
We're about to witness history, a once in a century event. Enjoy the show.
Note
Today marks Triple Witching. The story goes, in 1987, the Friday before "Black Monday", the event had caused the selloff of options and future contracts to rapidly accelerate, resulting in market makers selling stocks that they had previously purchased to hedge the writing of these options. The massive sell orders were unmet on the day the following Monday. This event had caused the actual change of regulators moving options expiration from the morning to the afternoon, and further circuit breakers in place - so our decline will not unfold in the same manner. Instead, I expect the drop to occur over the next two weeks. TGIF
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