The Black Monday 1987 Legacy: Crashes as Opportunities

Black Monday 1987: Crashes as Opportunities

Updated March 2023

Stubbornness does have its helpful features. You always know what you’re going to be thinking tomorrow. Glen Beaman

These chaps just won’t quit with their relentless push of this rubbish upon the unsuspecting masses. It’s an exemplary display of insanity in action, prattling on with the same old tune time and again, desperately hoping for a different outcome. Alas, the outcome shan’t be different this time, at least not yet. These fellows ought to stick to penning fiction, for reality seems to elude them completely. For years, we’ve proclaimed (and rightfully so) that until the sentiment shifts, this market shall continue its ascent to greater heights.

Behold, a mere snippet of the deluge of articles that has been spewed forth this month. Perusing them, one would be hard-pressed not to discern a marked similarity among them. Scant originality can be detected in these pieces. The theme is a trite one, with October being the month that marks the anniversary of the 1987 crash, the focus has predictably been on its disastrous aspect. Almost no one seems to mention that it proved to be a historic buying opportunity.

The attention is solely on how the financial world came to an abrupt halt. However, it did not; the only thing that came to a halt was the rubbish that the predecessors of today’s “experts” were spouting back in ’87. This only reinforces the notion that the majority of financial writers have selected the wrong profession. One term encapsulates all of this absurdity: “Rubbish.”

Could the 1987 stock market crash happen again? – Reuters
Black Monday anniversary: How the 2017 stock market compares with 1987 – Market Watch
Black Monday: 30 years after the 1987 stock market crash… Wall Street raises fears of REPEAT- express.co.uk
Thursday marks 30th anniversary of the Black Monday stock market crash – courier-journal
Buy Climax at the 30th Anniversary of 1987 Stock Market Crash – Money Show
The Crash of ’87, From the Wall Street Players Who Lived It – Bloomberg
Black Monday: Can a 1987-style stock market crash happen again? – USA Today

Is A Black Monday 1987 Type Event Out Of The Question?

Our conviction remains unwavering; the market is due for a correction, and for the astute investor, labeling it a “crash” is imprecise. A strong correction is the more probable outcome, given that most savvy investors entered the market well in advance.

It is the herd that will eventually jump on the bandwagon as the market peaks, and they will bear the brunt of this much-discussed crash. The Crash of 1987 and Black Monday are a testament to the fact that the masses are routinely on the wrong side of the fence. They buy high and sell low, and these cycles will persist as the mass mindset is ingrained to fail. Simply put, misery loves company, and that explains this mass mentality.

Presently, although the markets are oversold, the fear levels remain low, and hence, until the masses panic, it is likely that we’ll see another bout of selling. This corrective wave could cause most indices to fall to or below their 2022 lows. The NDX (Nasdaq 100) is expected to diverge, and it is the most likely culprit at this point. Furthermore, the Tactical Investor Alternative Dow theory suggests that the markets are headed for a downturn as they have generated a negative divergence signal, and the only way to counter this is for the Dow utilities to produce a positive divergence signal or for them to plunge into the extremely oversold territory. Given their current velocity, this could take up to three months.

Market Sentiment: Crowd Is Not Scared

The bullish sentiment has escalated somewhat, and the crowd is not as apprehensive as it was at the outset of this month or last month. However, unless the readings indicate that this crowd is euphoric, a crash is improbable.

The masses need to be in a state of hysteria before a long-term multi-month bottom can take hold. Until then, it would be prudent for long-term investors to utilize rallies to accumulate cash

Looking back at any bubble or market top, one common element is present: the masses were in a state of rapture before the market plummeted. Even the tulip mania, where the mass media element was absent, ended on a note of euphoria. Without delving further, we must concede to some of the emails from our subscribers who are long-term investors, stating that this is a once-in-a-generation buying opportunity. The sell-off of 2022 was based on assumptions and conjectures. This hysteria-based selling is creating a rare opportunity for the shrewd investor.

The crashes of 1987 and 2008 fall under the category of the “mother of all buying opportunities,” but we may witness a setup that could surpass these setups and create the “father of all opportunities.” Such an event is so rare that it might occur only once in an individual’s lifetime. In the short term, there’s no denying that the landscape looks like a massacre, but if one solely focuses on short timelines, the likelihood of reaping enormous profits is quite slim.

Why Not Try Something New For A Change:

Once the trend is identified, the remainder of the investing process becomes relatively straightforward. We provide numerous plays for a simple reason – to enable new traders to identify those that appeal to them. Shedding past preconceptions and embracing new concepts takes time, and we strive to simplify the process by providing a diverse selection of plays. Rather than feeling overwhelmed by the number of plays, one should understand that it’s unnecessary to initiate a position in all of them. Choose those that appeal to you and disregard the others until you become familiar with our methodology. With confidence, you can deploy greater amounts of capital.

Create a list of stocks that you would like to own at a discount. When the markets pull back again – and there is a good likelihood that they will test their 2022 lows – you can calmly select the best stocks for pennies on the dollar while the masses panic. As was the case with Black Monday 1987, you can utilize the next corrective wave or crash to establish key positions in strong companies.

Overview and additional thoughts on Market Crashe

The Psychology Behind Market Crashes: Why They’re Long-Term Buying:

Market crashes, such as the ones experienced in 1987, 2008-2009, and the COVID crash, are often associated with panic, hysteria, and widespread pessimism. In retrospect, these crashes have proven to be some of the most exceptional buying opportunities of our time, and the strong correction of 2022 is no exception. Understanding the psychology behind these events is crucial to profit from the opportunities they present.

One of the key factors in market crashes is the mass psychology of investors. Masses are prone to panic, often leading them to sell off en masse, exacerbating market volatility. This psychology is evident in the 1987 Black Monday crash, where the masses panicked and sold their shares. However, investors who remained calm and held onto their shares were rewarded as the market rebounded and provided a tremendous buying opportunity.

Understanding Mass Psychology and its Impact on Market Downturns

Similarly, the 2008-2009 financial crisis was another example of mass psychology at work. Fear, uncertainty, and widespread pessimism gripped the market as the financial system teetered on the brink of collapse. However, those who remained steadfast and believed in the market’s underlying strength were rewarded as the market bottomed out and started to recover. Again, those who bought into the market at this time enjoyed significant gains as the market rebounded.

The COVID crash was another example of mass psychology in action. The global pandemic caused widespread panic and uncertainty, which resulted in a significant market downturn. However, those who held their nerve and recognized that the market would eventually recover enjoyed impressive returns as the market rebounded.

The strong correction of 2022 is yet another example of mass psychology at work. The sell-off was based on conjectures and assumptions rather than underlying fundamentals, and this hysteria-based selling created a rare opportunity for the shrewd investor. As with previous market crashes, the market will rebound, and those with the foresight to invest now will be rewarded.

Understanding the psychology of the masses is critical to profiting from market crashes. The masses panic, sell their shares, and create opportunities for those who remain calm and have faith in the market’s underlying strength. It is essential to remain level-headed, focus on the long term, and recognize that market downturns are temporary and present exceptional buying opportunities.

Market crashes, such as the 1987 Black Monday, the 2008-2009 financial crisis, the COVID crash, and the strong correction of 2022, are long-term buying opportunities based on mass psychology. By understanding the psychology behind these events, investors can remain calm, hold onto their shares, and take advantage of the opportunities presented by market downturns. The key is to remain focused on the long-term and recognize that market downturns are temporary, and provide exceptional buying opportunities for those with the foresight to invest.

Overview and Summary of Black Monday 1987 Article.

In October, many financial writers focused on the anniversary of Black Monday 1987 and predicted a market crash, but this sentiment is misguided.
Market crashes, including Black Monday, can present long-term buying opportunities for investors who remain level-headed and recognize the market’s underlying strength.
The psychology of the masses is a critical factor in market crashes, as panic and pessimism can exacerbate market volatility and create opportunities for savvy investors.
Understanding market sentiment is crucial to predicting market performance, and stock markets tend to crash during euphoria, not pessimism.
Technical analysis is useful for identifying trends but should be used in conjunction with market sentiment and underlying forces.
Wall Street experts often have a poor track record of predicting market crashes, and it’s important to consider the source of investment advice carefully.
The current market may be due for a correction, but labelling it a “crash” is imprecise. A strong correction is a more probable outcome.
The fear levels remain low; hence, a market crash is improbable until the masses panic.
Investors can utilize market downturns to accumulate cash and create a list of stocks that they would like to own at a discount.
Market crashes are temporary, and investors who focus on the long-term and recognize the market’s underlying strength can reap significant gains.

Summary

Market crashes, including Black Monday 1987, are often associated with panic, pessimism, and widespread sell-offs. However, savvy investors who remain level-headed and recognize the market’s underlying strength can take advantage of these opportunities and enjoy significant gains. Understanding market sentiment, the psychology of the masses, and the usefulness of technical analysis can help investors make informed decisions and avoid succumbing to market hysteria. While market downturns can be unsettling, they are often temporary and present exceptional buying opportunities for those with the foresight to invest.

Obstinacy is the result of the will forcing itself into the place of the intellect.

Arthur Schopenhauer