The current state of the US stock market shows a clear downward trend, with significant indicators pointing to declines. Notably, the Nasdaq has seen a substantial drop, falling below its previous low and experiencing a 9% decrease, settling at 13,063.
This decline is mirrored by the Dow Jones Industrial Average and the S&P 500 Index, recording respective drops of 5.6% and 7%. Cryptocurrency Markets Down 19% Since April Peak, Raising Worries of a “Red October”. In line with this, cryptocurrency markets have also taken a hit, dropping by 19% since their peak in mid-April 2023. This decline has raised concerns about the possibility of a “Red October.”
This decline indicates a strengthening bear market for both traditional stocks and cryptocurrencies. Historically, October has been a challenging month for financial markets, often marked by losses instead of gains. The stock market’s decline has persisted for the past two months, which is expected to continue into October.
Looking at the Nasdaq, it’s important to note that the index fell below its previous low in August and set a new lower low this week. This downtrend, analyzed by the crypto expert “Cold Blooded Shiller,” began mid-July. During this period, the Nasdaq Composite Index, which heavily features technology stocks, dropped by 9%, closing at 13,063 on September 26.
Additionally, the Dow Jones Industrial Average has seen a 5.6% decrease since the beginning of August, while the broader S&P 500 Index has followed suit, experiencing a nearly 7% drop since the downtrend began in July, settling at 4,273 after Tuesday’s trading.
Furthermore, the S&P 500 has fallen by 340 points since the Federal Reserve adjusted its economic outlook, removing the term “recession” from its forecast. According to insights from the Kobeissi Letter, this marked a crucial turning point, coinciding with the S&P 500’s lowest level since June. This period has seen deferred rate cut expectations and a surge in corporate bankruptcies, reaching unprecedented levels since the pandemic began.
While several prominent banks agreed with the Fed’s decision to withdraw recession predictions, the markets have shown some defiance. Crypto markets have primarily remained stable, though somewhat correlated with tech stocks this year.
After an initial surge in growth during the first quarter, they’ve exhibited relative stability since mid-March. However, they have also observed a significant 19% decline since their high point in mid-April, indicating a clear downward trend.
Historical Context: October’s History of Market Crashes Historically, October has been the most volatile month for US and global markets. With the current downtrend, markets, including the crypto sector, will likely continue sliding into negative territory next month. Notably, October has a notorious track record for market crashes, with significant events like the Bank Panic of 1907, the Stock Market Crash of 1929, and Black Monday in 1987 all occurring during this month.
In recent years, the performance of crypto markets in October has varied. In the bear market of 2022, they remained relatively stagnant, with marginal gains toward the end of the month. In contrast, the bullish trend of 2021 saw substantial crypto growth in October. However, 2020 and 2018 mirrored the flatter performance of 2022. The bear market in 2018, much like 2022, was characterized by minimal movement in October.
If history repeats itself, crypto markets will likely show a similar level of stagnation next month. However, it’s important to note that November traditionally brings increased volatility to this asset class. This suggests that while October maybe a month of relative stability, investors should prepare for potentially more turbulent times ahead.
