Larry’s note: I issued a warning in February 2020 right before the market fell 34%, and another one in January 2022 before another 20%-plus drop.
Now, I’m issuing my most timely warning yet…
It involves a massive market “shock” that’s guaranteed to happen just days from now, and most people are unprepared. But Wall Street is preparing for this event as we speak.
The steps you take beforehand could determine whether you end up “in the black” this year… or down in the red. That’s why I’m sharing all the details in an exclusive broadcast on Wednesday, September 7 at 8 p.m. ET to prepare people for this shock.
Please go right here to sign up and join me.
And below, read on about why we’ll never see a day like Black Monday again…
This year, markets have been volatile, sending stocks tumbling into bear market territory and crushing many people’s brokerage accounts in the process.
And many people are worried about the future, with inflation fears lingering and interest rate hikes still on the horizon.
But I’ve been through this – and worse – before.
In fact, early in my career, I lived through the worst crash in U.S. history: Black Monday.
I’m happy to say that we’ll never see a day like Black Monday again.
But that doesn’t mean we can’t learn something from it for our current environment… especially given what I see coming…
The Worst Crash
As a reminder, Black Monday is when the Dow closed down almost 22% on October 19, 1987. It was the largest one-day drop in its history.
There was so much volume in the market, the computers got overwhelmed and shut down. The entire market stopped for hours at a time. Traders left the floor and wandered the streets without a clue of what to do.
It was complete pandemonium.
Of course, hindsight is 20/20. But we all should’ve seen that crash coming…
During the entire month of July 1987, the market only had one down day. It just kept going higher and higher. Euphoria was setting in.
It was a classic overextended condition. But most folks didn’t recognize it at the time.
Then, seemingly out of nowhere, it became a little more volatile in August.
It didn’t seem like much to worry about at the time. The market was still up about 25% on the year.
But then September brought even more volatility.
And by October, leading up to the crash, volatility was ramping up…
An Especially Volatile Day
The Friday before the crash, the market got crushed and finished near the lows.
By Monday morning, the market totally crashed… It went completely nuts.
Back then, I was trading at Fossett Trading Company for a guy named Steve Fossett, who was a brilliant investor.
On the trading floor, I was short six put options and six call options. At the time, that was a big position for me. And the market just kept going down…
I initially sold the puts at $6, and I sold the calls at $6.
I wound up buying back the puts at $60… a loss of $54 per contract.
When the market goes down, generally call options go down, too. But since it was so volatile, call option premiums actually rose.
With extreme volatility shaking the market, these calls went to $50. If I’d bought them back at that level, I would’ve been crushed.
But I plainly told Fossett I didn’t want to buy the options back because it was just ridiculous, considering the action that day…
I got away with it.
And I’m glad I did.
The market went up 500 points the Tuesday after the crash.
The calls I sold for $6 went from a massive loss of $50… to $1 per contract.
I’m lucky I got to hang on. If I had been forced to cover those calls at $50 the day before, it would’ve blown the account to zero.
Back then, market inefficiencies caused complete mayhem. No one knew how to react to an event like that…
There was even a period where all trading activity basically stopped.
When the afternoon rolled around, there were more people outside the exchange than inside. People were freaking out and walking around aimlessly.
The market virtually ceased to exist. The exchanges weren’t functioning. If you wanted to sell a stock, you couldn’t. The system totally crashed. The game was over… the market was closed.
So, we basically stopped working in the middle of the day.
The market then opened Tuesday morning and robbed investors. Stocks opened significantly higher than where they closed and came back up to the previous Friday’s lows.
Why We’ll Never See Black Monday Again
The good news is, I don’t think an event like Black Monday would be allowed to happen in today’s market.
With the circuit breakers we have now, it’s basically impossible.
The Federal Reserve just steps in and accommodates. The market closes automatically if things fall too far.
There would still be panic, but now there are safeguards against that panic. If you stop the market from trading, people go home and clear their head.
Drastic behavior just wouldn’t continue the way it used to decades ago.
After all, I believe in the mantra that “the market never does the same thing twice.”
But the market can still experience massive shocks, and with today’s current volatility, I see one happening soon.
That’s why I’m preparing an Urgent Warning for readers about a market event that’s guaranteed to occur just days from now.
We’re coming up on another volatile period… and a massive shock in one of the market’s largest exchanges.
Unfortunately, most people will be caught off guard.
But as we speak, the biggest players on Wall Street are preparing for it.
And next week, I’m going to show everyone how to do the same.
I believe this coming shock could help put everyday folks “back in the black” for the year if they’re prepared.
So, I’d like to invite you attend my upcoming briefing on Wednesday, September 7 at 8 p.m. ET. I don’t want any of my readers to get caught off guard.
There, I’ll share exactly what’s coming… and the single ticker that could help us flip this situation to our advantage.
Go right here to secure your spot.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict