Survival of the fittest
by Philip Gotthelf
With the proper tools and right attitude, the "Crash of '87" represented one of the greatest profit
opportunities in history. A single short S&P 500 futures position could have delivered an amazing
$60,000— without even picking a top or bottom. However, we have the benefit of 20/20 hindsight.
Could we have spotted the Crash in time to profit? If so, could we have maintained the cool discipline
required to stay with short positions long enough to take advantage of "Black Monday" and moves that
The answer to the first question is obviously yes. It is the second question so many must answer in the
negative. In reality, few were able to sustain positions through the wild swings that took place the week
before Black Monday.
An examination of the December S&P 500 chart (Figure 1) reveals that the market held support at 31000
throughout October 12. This area was tested in mid-September and late August. In addition, the June/July
consolidation held above 31000 for more than four weeks. Therefore, strict chartists should have sold the
S&P 500 on October 12, 13 or 14. The support was violated. Furthermore, the 10-day moving averages
had been penetrated.