\tYesterday morning, on the 30th anniversary of the biggest one-day decline in the history of the U.S. stock market, the S&P 500 was set to wipe out all of the gains of the past two weeks.<\/p>\n
\tThe index lost 12 points in the early moments of trading.<\/p>\n
\tIt was a bloodbath. Nervous traders saw red on their quote screens instead of the festive green they’ve grown so used to seeing.<\/p>\n
\t“I thought something was wrong with the internet,” one trader was overheard saying, “There were minus signs instead of plus signs. It frightened me.”<\/p>\n
\tFinancial television talking heads were prepared to go into panic mode. “This could be it,” one reporter announced, “This could be the start of a selloff. It is, after all, the anniversary of the crash.”<\/p>\n
\tIf the morning decline had held through the end of the day, the S&P would have closed 0.4% below its all-time high. We haven’t seen that sort of a decline all month. We don’t know how the investing public would have responded to a loss like that. We can only guess that it wouldn’t have been pretty.<\/p>\n
\tFortunately, we don’t have to make that guess.<\/p>\n
\tStocks bounced back by the end of the day. Red quote screens turned green. Plus signs appeared where minus signs had been. And the S&P 500 rallied just enough to notch another new all-time high.<\/p>\n
\tWhew.<\/p>\n
\tOf course, we don’t know for sure what stopped the early-morning slaughter of stock prices and ignited the afternoon bounce. Maybe it was the superhero technical analysts who reported the S&P 500 was finding support at its 9-day EMA. Maybe the head of the Trilateral Commission fired off an angry email to his minions, telling them it was too soon to set off a stock market panic. Maybe it was divine intervention reminding investment bankers that performing “God’s work” usually involves raising stock prices.<\/p>\n
\tAll we know for sure is that the stock market was on the verge of a massive 0.4% decline. And somehow, some way, we dodged that bullet.<\/p>\n
\tOf course… I’m being sarcastic today.<\/p>\n
\tIt was curious, though, to see how concerned so many people were when the market opened lower yesterday. Financial reporters and market commentators appeared genuinely concerned that we could have a repeat of the ordeal that happened 30 years ago. I received several emails from trader friends asking me if I thought things were going to get much worse.<\/p>\n
\tIf folks are getting this worked up over a 0.4% decline in the stock market, just how frightful will they be when the market has a 1% drop, or a 3% drop, or (gulp) something larger?<\/p>\n
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