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Cramer: Get Ready for Another Black Monday

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Tom Brennan
CNBC
Saturday, Oct 11, 2008

The Dow lost 2,000 points this week, making it the worst sell-off since 1933, Cramer said. He doesn’t think we’re done, though.

Today’s late-day rally brought us too far too fast, he said, and bottoms rarely happen on Fridays anyway. Main Street isn’t paying attention, they find out what happened over the weekend, and then Monday they start to sell.

Keep this in mind as next week starts. Cramer can’t decide if this market is closer to 1987 or 1929, but he’s pretty sure bad news from Morgan Stanley and lack of good news from the world’s industrialized nations could cause a sizable drop in the markets on Monday and Tuesday. The Dow could go as low as 5,886, he said.

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That’s what happened during the crash of 1987: The Dow lost 508 points from Friday’s close to the session-ending bell on Black Monday. Then Terrible Tuesday saw an intraday low 339 points below that before the market turned up. If this is how the present market plays out, Cramer wants investors to use a quarter of the cash he’s been urging them to raise each day to buy certain stocks on weakness. He thinks we might have come down enough to put some money back to work.

Why risk it? Because even people who bought stocks on the Friday before Black Monday broke even after a year. And those that bought during the lows of Monday and Tuesday saw some terrific gains 12 months later. Example: Kellogg [K 48.49 -0.13 (-0.27%) ] dropped to $9.70 from $16 on Black Monday, then climbed back to $16 a year later. So it makes sense that investors would want to buy stocks if the market dips, at least if it reacts the same as ’87.

  • A d v e r t i s e m e n t

Not that the market then and now are perfect corollaries. Present day is actually worse, Cramer said.

Full article here

This article was posted: Saturday, October 11, 2008 at 4:20 am





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