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🚨 Black Monday: 38 years since the largest one-day market crash
Today marks 38 years since Black Monday, the biggest one-day stock market crash in history. On October 19, 1987, the Dow Jones Industrial Average fell by 508 points, a massive 22.6% drop, while the S&P 500 declined by 20.5%. In just a few hours, over $500 billion in U.S. market value vanished, triggering a global panic and wiping out roughly $1.7 trillion worldwide.
🟡 What led to Black Monday?
This crash didn’t come without warning. After the 1982 recession, the stock market had been rapidly rising - the Dow had tripled, and in the seven months before the crash, surged another 44%. But by late 1987, valuations were extremely high, trade deficits were growing, inflation was rising, and the U.S. dollar was weakening. The Federal Reserve was raising interest rates, and Treasury Secretary James Baker hinted at devaluing the dollar, further eroding investor confidence. Markets had already fallen almost 10% in the days leading up to the crash.
🟡 The role of technology
One crucial factor was the rise of automated program trading, especially a strategy called portfolio insurance. Designed to limit losses by automatically selling futures as markets declined, it instead created a feedback loop of selling panic. This cascade overwhelmed the New York Stock Exchange’s systems, causing trading halts and outages. Panic spread rapidly, especially in the final hour and a half of trading.
🟡 The Federal Reserve’s response and recovery
The Federal Reserve acted swiftly. Chair Alan Greenspan promised liquidity support, encouraged banks to maintain lending, lowered interest rates slightly, and helped rescue critical financial firms. These quick actions stabilized markets and restored confidence. Remarkably, within two trading days, the Dow had regained more than half its losses, and by mid-1989, markets reached new highs fueled by strong economic fundamentals.
🟡 The lasting legacy
Black Monday changed market structure, the crash led to the introduction of circuit breakers to pause trading during rapid declines. It established investor expectations that the Federal Reserve would intervene during crises, what became known as the “Greenspan put.” Though a dark day in Wall Street history, it proved that resolute policy and solid economic foundations can convert panic into recovery.
Lessons from Black Monday remain highly relevant to today's markets with heightened risks and technological impacts influencing trading dynamics.
JUST IN: Trump has announced plans to visit China sometime fairly early next year.
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JUST IN: Trump warns that there will be a big price to pay if no deal is reached to end the war in Ukraine.
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❕ Hedge funds are sitting on $1.85T in hidden Treasuries
The Fed just discovered that hedge funds in the Cayman Islands hold roughly $1.85 trillion worth of U.S. Treasuries — over four times more than official data suggested.
🟡 The gap comes from the basis trade, where funds buy Treasuries and short futures to profit from tiny price gaps.
🟡 They borrow heavily via the repo market, using those Treasuries as collateral.
🟡 As bonds get rehypothecated (reused multiple times), tracking true ownership becomes nearly impossible.
This hidden leverage means the Treasury market might be far riskier than it looks. If these trades unwind at once, liquidity could vanish and the Fed would be flying blind into the next shock.
JUST IN: Kevin Hassett expects that Scott Bessent's meetings on China will resolve misunderstandings, according to CNBC.
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JUST IN: Hassett believes the government shutdown is likely to end sometime this week, according to CNBC.
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JUST IN: President Trump is considering deploying National Guard troops to San Francisco as part of his crime crackdown initiative.
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JUST IN: The chief of India's central bank has stated that the country intends to promote CBDC while discouraging cryptocurrencies and stablecoins.
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JUST IN: The Global Times describes Donald Trump's threat targeting China's cooking oil as ineffective.
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JUST IN: Bessent states that the stock market will not impact negotiations with China.
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JUST IN: Nasdaq 100 futures have climbed more than +1%, with investors downplaying trade frictions between the US and China.
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📈 75 years of S&P 500 pain and gain
Since 1950, the S&P 500 has averaged 11% annual returns while enduring an average 14% drawdown each year.
The chart shows how often deep pullbacks still ended with strong yearly gains.
The lesson? Volatility doesn’t equal a permanent financial loss unless you sell.
Every blown account was built on the same foundation:
Impatience, ego, and denial.
You don’t fix that with more setups.
You fix it by facing the truth you’ve been avoiding.
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JUST IN: Donald Trump stated that Argentina should avoid any military cooperation with China.
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JUST IN: Global gold ETFs recorded net inflows of $2.1 billion last week, their seventh consecutive weekly gain, following a record $5.3 billion in the prior week. Year-to-date, these funds have attracted $68 billion in inflows, the highest for any year on record.
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JUST IN: US natural gas prices have surged more than 12% today, setting up for their biggest daily gain since July 2022, amid rebounding energy costs fueled by heightened winter demand expectations.
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JUST IN: Trump stated that he could threaten China on additional matters beyond current issues, including airplanes.
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JUST IN: Donald Trump stated that China has been respectful of the US and is paying significant money through tariffs. He mentioned planning to meet Chinese President Xi in South Korea in a couple of weeks to work out a fair trade deal, adding that China could face a 155% tariff if no agreement is reached by November 1.
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JUST IN: The US federal deficit for FY2025 reached $1.8 trillion, based on CBO projections.
• Equals 6.0% of GDP, one of the highest levels excluding WWII, the 2008 Financial Crisis, and the 2020 Pandemic.
• Ranks as the fourth-largest budget shortfall on record, after a $3.1 trillion gap.
This substantial deficit could fuel worries about long-term fiscal health, potentially driving up Treasury yields as borrowing demand rises and weighing on investor confidence in US economic stability.
JUST IN: Kevin Hassett warns that if the government shutdown persists, the White House will consider implementing stronger measures.
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JUST IN: President Trump stated that India's Prime Minister Modi assured him that India will cease buying Russian oil. This comes after Trump imposed a 50% tariff on India on August 27 as punishment for those purchases, hinting at a possible US-India trade deal.
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🧠 Trading Psychology: 10 Lessons That Separate Winners from Losers
You can have the best strategy and perfect risk management, but without the right mindset you’ll still fail. Trading success comes down to consistency, discipline, and emotional control.
🟡 Stop searching for the Holy Grail
There’s no perfect system that always wins. Focus on building one that fits your own risk and goals.
🟡 Accept losing trades
Losses are part of the game. Trying to avoid them completely means you’ll miss real opportunities.
🟡 Ignore other people’s predictions
Trade what you see, not what others think. The market doesn’t care about opinions.
🟡 Know when to enter
Follow your signals and take trades only when the risk-to-reward makes sense.
🟡 Know when to exit
Plan your exits before you enter. Protect profits instead of hoping they grow forever.
🟡 Cut losers fast
When a trade fails, close it. Small losses are tuition, big ones are fatal.
🟡 Control your emotions
Trade the plan, not the fear, greed, or ego whispering in your head.
🟡 Stay positive
Focus on discipline and progress, not on past mistakes. Energy follows attention.
🟡 Overcome fear of real money
At some point, you must execute. If you’ve done your homework, trust your system and take the shot.
🟡 Think long term
Success comes to those who endure. Focus on the bigger goal, not the bumps along the way.
Trading is as much mental as it is technical. The system gives you an edge — but your psychology decides whether you keep it.
⚙️ China is a paradox
China is both modern and poor.
High-speed trains cut across futuristic cities and endless countryside, past homes where hundreds of millions still earn under $7 a day.
Its rise is unmatched, yet its society remains anxious. Decades of rapid growth can’t erase a century of hardship from its collective memory. Even as its middle class grows, confidence lags behind.
🟡 A system of contradictions
The government follows Marxist-Leninist doctrine, yet the economy thrives on state-led capitalism and fierce competition.
Western critics claim China only advances through IP theft and subsidies, but its industries tell another story — dominance in EVs, renewables, drones, robotics, biotech, and now AI.
Still, cracks show. The property market remains weak, local debt is heavy, and youth unemployment data quietly disappeared. China is digesting its boom years and facing the cost of overbuilding and overborrowing.
🟡 Both inefficient and unbeatable
Western analysts say China’s economy is “too inefficient” because of state control and “too competitive” because its surviving companies are battle-hardened.
Its internet sits behind the Great Firewall, yet its AI labs release world-class open models faster than anyone else.
Every few years, someone predicts China will implode or democratize. Decades later, neither has happened. The system keeps adapting, often succeeding where others expect failure.
🟡 A civilization of contradictions
It’s 5,000 years old with a 76-year-old communist government.
It’s both spiritual and materialistic, both traditional and technocratic.
The same society that prizes family and order also fuels one of the most cutthroat, innovative economies on Earth.
Even its biggest challenge — demographics — is a product of success. Rapid industrialization, urbanization, and education have reduced birth rates faster than any policy ever could.
🟡 Why it matters
China’s paradoxes make it impossible to define with one lens.
It’s both competitor and teacher, fragile and unstoppable, repressive and visionary.
Its contradictions are not signs of weakness but sources of resilience.
As Dan Wang said:
“The best hedge against rising tensions between the two superpowers is mutual curiosity”
JUST IN: Bessent might request US defense companies to conduct fewer share buybacks.
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JUST IN: Scott Bessent claims he has reviewed data showing that the shutdown is inflicting $15 billion in daily damage to the economy.
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⭕️ The Trade War cycle, Trump edition
It always starts the same: Trump gets tough on China, markets panic, and prices drop.
Then comes a hint of resolution, markets bounce, and the game resets.
Trump buys low on fear, sells high on relief and repeats the playbook.
Some cycles never die. They just rebrand as “policy.”
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JUST IN: Trump has accused China of an "economically hostile act" by refusing to buy US soybeans. He stated he is considering terminating business with China involving cooking oil and other trade aspects as retribution.
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📈 Turtle Soup Trading Strategy explained
The original Turtle Traders became famous for their breakout system, buying strength and selling weakness to ride long trends.
But every strategy has a weakness. When breakouts failed, they lost heavily.
Linda Bradford Raschke saw an opportunity in those failures and built her own version called Turtle Soup, a method that profits from false breakouts and price reversals.
🟡 How the idea works
Instead of chasing momentum, Turtle Soup looks for exhaustion.
When price breaks to a new high or low and quickly snaps back, it often traps trend followers.
Raschke designed this method to trade against those traps, entering at the point where momentum breaks down and price returns to its average.
🟡 Using the Donchian Channel
The Donchian channel tracks the highest and lowest prices over a set number of days, often 20.
It shows when price moves outside its normal range, giving clear signals for possible reversals.
Turtle Soup uses this channel to identify moments when a new breakout is likely to fail.
🟡 Buy setup
A long entry appears when price makes a new 20 day low that is at least four days apart from the previous one.
If the market then bounces back above that old low, it signals rejection of the breakdown.
A buy order is placed just above the previous low, with a stop slightly below the day’s low.
The goal is to capture the quick return to the mean rather than hold for a long trend.
🟡 Short setup
The short entry follows the same logic in reverse.
When price hits a new 20 day high and then falls back below the old high, it shows failed strength.
A short order is placed just below that old high, with a stop a few cents above the day’s top.
🟡 Managing trades
If the trade fails immediately, the same entry level can be reused once the signal appears again.
If it moves in your favor, a trailing stop can protect profits, often set at one unit of risk (1R).
This way, losses stay small while winners have room to grow.
🟡 When it works best
Turtle Soup performs well in range bound or choppy markets where trends struggle to hold.
It thrives on the emotional swings that make traders chase breakouts too late.
Instead of fighting the market, it waits for the crowd to overreact and steps in the opposite direction.
Not every breakout is a new trend.
Sometimes the best trades come from knowing when the story has gone too far and the price just wants to return home.
JUST IN: The Dow has rebounded from a 600-point drop and turned positive, after US Trade Representative Greer announced a scheduled meeting between President Trump and China's President Xi.
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