After suffering the largest point drop in a single day, the markets are likely set for another turbulent trading session. Dow futures saw a 206-point loss at the open after slumping an additional 400 points overnight while the E-mini S&P 500 opened 26.24 points higher followed by the E-mini NASDAQ with a 43-point gain.
While Monday’s sharp 1,175-point decline in the DOW made history, the index has suffered worse single day percentage declines. Monday’s 4.6% loss was nothing to brush off, however it is a far cry from the largest one-day percentage loss of 22.6% which earned the naming rights of Black Monday. That selloff, which fell on October, 19th 1987, saw the DOW dip 508 points.
Speaking in terms of percentage, it is important to note that the DOW has gained nearly 1,300% over the last 31 years. To make history, the index would need to fall to 1,950 – in a single day.
Meanwhile the CBOE Volatility Index, largely used to gauge fear within the market, climbed to highs not seen since 2015 reaching nearly 50 points overnight. Early trading on Tuesday shows the VIX retreating back to the mid-20’s.
Trading during times of heightened volatility requires properly managing risk & reward. Incorporating protective stops and targets to open positions is paramount.