I am still in awe to the huge drop and rise in the U.S. equity markets. It looks like it might of started with Procter & Gamble along with other Dow component stocks. They went into absolute free-fall, wiping out over $1 trillion dollars in market capitalization and a fall of almost 1,000 points on the DOW Jones Industrial Index. Nightly Business News said a rumor was that a trader did a $16 billion dollar trade instead of a $16 million dollars. This seem implausible that this was the cause, I would hope there would stops in place to prevent someone that didn’t have that size of a position without actually having those equities available.
My thoughts after hearing all of the damage control and in my opinion jaw-boning propaganda is that their was some seriously sensitive automated computer trading programs and after the large fall earlier in the day, some serious technical levels were broken and they triggered these high frequency trading computers to start selling and this triggered a cascading effect in the markets. How is this “innovation” in financial markets healthy? What happened at 9,977 on the DOW that made them turn around and shoot straight up? Something fishy is going on and some light needs to be shed on this subject. With Greece in peril and the markets up so dramatically when governments are running huge deficits and unemployment is still in the double digits, maybe this was not a mistake. I just watched the COO of NYSE say that was obvious because of the rise in stocks so quick that it was a glitch but then the Nasdaq said it was a lack of liquidity according to Bloomberg TV. Something is not matching up here, we need answers.
Computerized trades sent to electronic networks turned an orderly stock market decline into a rout, according to Larry Leibowitz, the chief operating officer of NYSE Euronext. Nasdaq OMX Group Inc. canceled trades in 286 securities that rose or fell 60 percent or more.
While the first half of the Dow Jones Industrial Average’s 998.5-point intraday plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.
“If you look at the charts you can see fairly clearly where the trades came in,” he said from New York. “It’s that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split-instant because there really was no liquidity in electronic markets.”
The selloff briefly erased more than $1 trillion in market value as the Dow average tumbled 9.2 percent, its biggest intraday percentage loss since 1987, before paring the drop. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are reviewing “unusual trading” that contributed to the plunge.
Analysis: Even if this was a mistake, technically we are due for a major pullback and it has begun. Trade at your own risk.