wmeubank@ocp.kcmo.com
COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(October 20, 1997) FINANCIAL INSTRUMENTS: Fears of inflation and lower bond prices caused the Dow Jones to drop hard on Thursday and Friday. From the high set on Thursday,to the low set on Friday, the mighty Dow fell 356 points. The S&P 500 futures contract fell $23,000 during the same time period. It was an ugly week for those bullish towards stocks.
But then again, such negative price action during the month of October is not unusual. October is the most bearish month of the year for the U.S. equity markets and this past week's dismal performance simply reflects that fact of history.
Keep in mind however, that the flip-side to a bearish October is this; prices generally fall so far and so fast that an excellent buying opportunity is presented to aggressive traders and investors. In other words yes, October tends to be bearish for equities. But by the same token, some of the most important lows in the history of the mighty Dow have been set during October.
My work continues to suggest that the stock and bond markets are carving out a major top. From whatever highs are set, nothing less than a 10% correction should take place. Therefore, even though stocks may bottom from some depressed level here in October, and then rally like crazy, I will view such a “bounce” as a selling opportunity.
Jerry F. Welch
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