October Lives Up To Its Reputation





October that ended yesterday was quite bearish most all markets. Stocks and bonds fell to multi-month lows on the final session of the month. During the month of October, similar weakness was also seen a host of other markets. By any measure, October was bearish but that is not much of a surprise. After all, history shows October to be the 2nd most bearish month of the year for most all markets.


Below is a chapter from Haunted By Markets entitled, October Lives Up To Its Reputation that I penned back on October 28, 1997. I hope you enjoy it.

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Oct. 28, 1997:


October Lives Up to Its Reputation


Thus far, October has lived up to its billing as being one of the most bearish months of the year. In past issues of this newspaper I mentioned several times that being a bull during October is a tough thing to do. This October turned out to be downright ugly. At least for the bulls.

It is no great secret that October is the most bearish month of the year for the equity markets. My work has also shown that October can be nearly as bearish for the commodity markets as it is for the equity markets. In some cases, October can be more bearish towards commodities than equities. But generally speaking, October treats all markets equally ... with disdain.

For example, a few days ago, it was announced that Switzerland would be liquidating some of their massive gold stocks and use the proceeds for domestic projects. The response to such news by the gold market was swift and certain. Gold prices dropped to their lowest levels in 12 years. The break in gold pushed all other metal prices plummeting as well, with platinum falling to a two-month low while copper prices fell to an eight-month low.

There were other commodities in October that also fell sharply in price. Orange juice prices, for instance, hit a 15 year low this month while coffee prices dropped to a three-month low. Livestock prices also came under a great deal of selling pressure as cattle prices fell to an eight-month low, and hog prices to their lowest levels in a year. Even lumber and cotton prices succumbed to the effects of a bearish October, with nearby futures for both commodities falling to levels last seen over 18 months ago.

But the market hammered hardest this October, and the one most widely followed by the media, was the mighty Dow Jones. On October 27, the Dow fell 554 points in one day, its worst single-day drop in history. The drop was so unexpected and severe that the stock market was actually shut-down for the first time since the 1981 assassination attempt on President Reagan. The Dow, the equity markets best known barometer, fell 554 points, surpassing the 508-point Black Monday crash of 1987, as its biggest point drop ever. However, on a percentage basis, the October 27 drop amounted to 7.18 percent, and didn't come close to the Dows 22 percent loss on Black Monday in 1987.

Nevertheless, the sell-off put the Dow's losses at 900 points over the past four trading sessions and 1100 points down from it's all-time high set on August 6. The collapse in the Dow and other world equity markets got underway a few days ago in Asia, when the Hong Kong stock market, the Hang Seng index, tumbled 12.75 percent in the first hour of trading. That break in turn was followed by a hard break in the Japanese stock market and soon, every stock market in the world was collapsing.

Interestingly enough, the grain complex held up relatively well this October, despite the fact that most other markets were being slammed. The simple fact that the grain complex is doing well at this time, implies that something uniquely bullish to grains is more powerful than the bearish forces pressuring other markets.

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Generally speaking and based on history, a poor close for any market on a Friday, going into a weekend tends to be bearish come Monday. The Friday that just ended had stocks and bonds at multi-month lows and two of the major commodity indexes, the CRB and Goldman Sachs index deep in the red as well. Will the markets take a nosedive in the week ahead? Only time will tell.


But for the past few weeks in my twice a day newsletter I have emphasized greatly that stocks are pricey based on history and commodities cheap. Moving forward, my lean it to avoid buying stocks but avoid selling commodities.


Drop me a line at commodityinsite1@gmail.com to learn more about my twice a day newsletter. Or, call me at 406 682 5010. I would enjoy hearing from you.


It is now Saturday, October 31, 7:57 a.m. Chicago time.



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