1987 crash - what happened

"Stocks Plunge; Interest Rate Fears, Computerized Sell Programs Cited"

"This one really came out of the blue. I didn't expect it to be so bad...

...(we) froze around 3 p.m. and just started watching the screens. Even the phones stopped ringing. We were watching history in the making."

- Wall Street Journal, 10/7/87

On October 6th, the Dow lost 91.55 points, or 3.5%. This was a new record point drop for a one day session. But the press was quick to point out that this didn't even make the top 100 down days in percentage terms. Still, some real concern was starting to sink in over the market drop. In fact, on October 6th while the Dow was plummeting, the new Chairman of the Securities and Exchange Commission was giving his first speech. His focus was on controlling market volatility in the event of a "market meltdown".

Over the next seven trading sessions the market continued to drop precipitously. The the DJIA fell to 2355. This was a drop of 10.8% from the 9/22 peak and 13.5% from the top on 8/25.

Things were about to get much worse. On Friday, October 16th the Dow opened about 10 points higher. It started to drop almost immediately. At its worst level, just before the close, the Dow was down 130 points. The Dow closed down 108.35 points (-4.6%) on record volume. The 338 million shares traded were 10% greater than the previous record of 302 million. The headlines reflect bewilderment:

"What's Next? Plunge in Stocks Has Forecasters Guessing; Some Stay Bullish, but the Bears Are 'Running Wild" -

"...It was the third major decline in as many days. But several technical analysts said the at the big volume accompanying Friday's session might mean better things ahead" - Wall Street Journal, 10/19/87

There was a lot of analysis of the market drop in the Wall Street Journal after the big drop and huge volume on Friday, October 19th. The Journal quoted many traders and analysts. Most quoted were bullish - they felt that they had seen a "selling climax". Some analysts were more cautious or bearish.

Since the Wall Street Journal is not published on Saturday and Sunday, so the above was published on Monday, October 19th. And within minutes after the market opened on October 19th, the answer to "What's Next?" was pretty clear.

The answer was panic...

Next

How can the market change so dramatically in eight weeks? How can a seemingly invincible market unravel into panic in such a short time? It has been 10 years since the the 1987 Crash, and the story is just as dramatic as it was 10 years ago...

Published by Lowrisk Market Analytics. Copyright © 1997 Jeff Walker. All rights reserved. Information in this document is subject to change without notice.

Published by Lowrisk Market Analytics.
Copyright © 1997 Jeff Walker. All rights reserved.
Information in this document is subject to change without notice.