Comments on: What is it about Thursdays? In ‘29, ‘08 & ‘10: giant intraday plunges w/ recoveries.

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By: Graphite

Graphite — Fri, 07 May 2010 18:55:31 +0000

The decision to bust trades could also have a catastrophic effect on liquidity in derivatives markets. Can you imagine running an automated option quoter or a futures index arb strategy when you don’t even know if your trades in the cash underlying are going to stick?

By: Mike

Mike — Fri, 07 May 2010 16:19:53 +0000

Mood turned negative this week around the globe — it resulted in market declines and angry Greeks. I don’t believe that the riots in Greece did anything to cause the market to fall.

By: Alex G.

Alex G. — Fri, 07 May 2010 15:29:52 +0000

Yes Mike,
all the media people in Athens let their bosses know what’s happening.
Yesterday was organized peacefull, but the crowd knew what was doing yesterday, 100s thousands gave panic to parliament members.
You know what everybody says?
They will get in the parliament and punish all the parliament members, you can imagine what wall street people think if that happens….

By: Mike

Mike — Fri, 07 May 2010 14:14:07 +0000

Nah, just a coincidence. The riots were worse on Wednesday, anyway, weren’t they?

Markets fell all over the world, like in east Asia — did the Koreans care about events in Greece?

By: Alex G.

Alex G. — Fri, 07 May 2010 13:21:20 +0000

Hi Mike,
did we cause the fall yesterday?
It was a protest in Athens last night. At that time the fall happened. Cnbc headline at that time was:
Greek Debt Crisis On Verge Of ‘Going Global’: Greek Debt Crisis On Verge Of ‘Going Global’
http://www.cnbc.com/id/36992469/
I think due to fear that Greek protesters could run in to the parliament , journalists in Athens got panic and they must transferd the fear to traders.
Alex

By: Mike

Mike — Fri, 07 May 2010 13:09:20 +0000

Exactly. This just further erodes confidence in the US markets, like the ban on shorting banks in 2008.

By: PEJ

PEJ — Fri, 07 May 2010 13:06:47 +0000

PS: This is going to be the subject of my next post!

By: PEJ

PEJ — Fri, 07 May 2010 13:05:37 +0000

I think your charts clearly show that this kinds of drops happened before computers even existed ; so the blame game is just plain absurd.

What I find particularly unfair and unjustifiable is the decisions from some exchanges to cancel trades where the drop was more than 60%. WHERE DOES THAT COME FROM?
How do you justify it? To explain to a speculator (we are all speculators, right?) that he was allowed to lose 59% but his neighbor’s 60% loss was canceled? How to explain to the guy who had the guts to buy at 70% drop that he’s going to have his profits taken away? Since when the exchange’s role is to arbitrate between its users? I don’t use stop-losses because I have had similar experiences in the past (20-30% intraday drop before recovery). Those who use stop orders should take their responsibilities.

By: Mike

Mike — Fri, 07 May 2010 12:38:00 +0000

I didn’t mention anything about computers here, either, which any discussion of yesterday should have. So, my opinion is that yes, computer stop-loss orders kicked in and buy orders were pulled, but this is just what would happen with humans.

You can definitely blame computers if you got screwed out of something during a split-second 50-99% drop though — that would never happen in a market with a human specialist to absorb order flow with his brokerage’s book. But that’s not the cause of the crash, just something that happens during a crash — buyers pull out and stop-losses kick in.

The cause is just an overbought, overbullish, overvalued market during a f-ing depression.