Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices, 4th Edition

CHAPTER 11

Evaluating the Commodity Market for Opportunities^*

October 19, 1987, was another typical Monday morning in which we prepared for the normal call volume of questions pertaining to which stock to buy, what sector to consider, and all the other typical questions professionals in the brokerage business mull over on such a typical Monday. The Dow Industrials had already shaken off 100 points or so the previous Friday, a material sum at the time, being the largest single-day point decline on record back then. This was about all we expected from the current correction, as this was the 1980s, after all. Frankly, by Monday morning our attention was shifting toward what to pick out of Friday's ashes. In fact, I bought call options on the OEX (S&P 100) Friday afternoon, expecting a nice snapback trade out of Monday's session. Of course, Monday morning didn't provide a snapback—far from it. Instead, we watched in amazement as the Dow Jones Industrial Average fell 22 percent in one day. By the end of “Black Monday” there stood just one day in the Dow's long history that left more carnage in one day than did October 19, 1987, and certainly few were around that might have recalled the 24 percent drop in the Dow Jones on December 12, 1914. To put that fateful Monday into perspective, a 22 percent decline in the Dow Jones would equate to something along the lines of a 2,900-point drop in the market today. Can you imagine the field day the media would have with a number like that? But ...