Terrible Two Two Tuesday: How bad will tomorrow's stock market crash be?

[BuyingThyme]

Poll question: Terrible Two Two Tuesday: How bad will tomorrow's stock market crash be?

[HereSince1628]

1. For those saying trading will be suspended...why? You expect a 10% drop?

or do you expect the automation to crash under the volume?

[Lone_Star_Dem]

3. I think the "circuit breakers" on the market are widely misunderstood

Most don't understand the amount it has to drop before they kick in or how limitedly they suspend trade.

[HereSince1628]

4. That's undoubtedly true.

I'm not sure I really know the branches of the decision tree leading to that decision either.

[Lone_Star_Dem]

8. Here's the rough break down of the 10/20/30% rules.

NYSE Circuit Breakers
These restrictions are also known as "Rule 80B." The first version of this rule, adopted in 1988, set triggers at 250 DJIA points and 400 DJIA points. These restrictions are updated quarterly to reflect the heights to which the Dow Jones Industrial Average has climbed.

* 10% decline (950 points for 3Q02)
The first circuit breaker is triggered if the DJIA declines by approximately 10%. The restrictions that are put into place -- if any -- depend on the time of day when the circuit breaker is triggered. If the trigger occurs before 2pm Eastern time, trading is halted for 1 hour. If the trigger occurs between 2 and 2:30pm Eastern, trading is halted for 30 minutes. If the trigger occurs after 2:30pm Eastern time, no restrictions are put into place. (This restriction was first used during the afternoon of 27 Oct 97.) Note that there is no similar restriction to the upside; nothing is done if the Dow rallies 10%.

* 20% decline (1900 DJIA points for 3Q02)
The second circuit breaker is triggered if the DJIA declines by approximately 20%. The restrictions that are put into place again depend on the time of day when the circuit breaker is triggered. If the trigger occurs before 1pm Eastern time, trading is halted for 2 hours. If the trigger occurs between 1 and 2pm Eastern, trading is halted for 1 hour. If the trigger occurs after 2pm Eastern time, the NYSE ends trading for the day. Again there is no similar restriction to the upside; nothing is done if the Dow rallies 20%.

* 30% decline (2850 DJIA points for 3Q02)
The third circuit breaker is triggered if the DJIA declines by approximately 30%. The restriction is very simple: the NYSE closes early that day. And like the other cases, again no restrictions are imposed if the Dow rallies 30%.

The circuit breakers cut off the automated program trading initiated by the big brokerage houses. The big boys have their computers directly connected to the trading floor on the stock exchanges, and hence can program their computers to place direct huge buy/sell orders that are executed in a blink. This automated connection allows them to short-cut the individual investors who must go thru the brokers and the specialists on the stock exchange.

Statistical evidence suggests that about 2/3 of the Mar-Apr 1994 down slide was caused by the program traders trying to lock in their profits before all hell broke loose. The volume of their trades and their very action may have accelerated the slide. The new game in town is how to outfox the circuit breakers and buy or sell quickly before the 50-point move triggers the halting of the automated trading and shuts off the computer.

http://invest-faq.com/articles/exch-circuit-brkr.html

[BuyingThyme]

10. Thank you.

[HereSince1628]

15. Yes, thanks.

[tuckessee]

2. It's a shame we've reached this point. Everybody saw it coming.

BTW, I voted 200-400. The US can't collapse just yet because there's still a few countries left we need to thug.

[ORDagnabbit]

5. plunge protection team?

[bighughdiehl]

6. So....

What specific reason is there to believe that the PPT doesn't still have a couple tricks up their sleeve to protect the big dogs in the market? Don't get me wrong, it will get bad one day, but last year we saw the Dow do 14,000 while people had their(good) jobs sent to China, paid ridiculous prices for food and fuel. I wouldn't be surprised if tens of millions of Americans are living in theird world or Great Depression conditions in a couple years while the Dow zooms up to 20,000. It's all part of an Orwellian "it all good, proles!" show. We have also seen it drop quite a bit a times only to see it rebound in no time on a rising see of hot air and excess liquidity. It's all just for show.
I predict tomorrow we will see a 400pt rebound(and it may test 15,000 in a couple months) because of what I have seen it do many times while most Americans suffer.

[2hip]

14. I'm seeing a bounce too

Contrary to popular opinion, I think some investors will see the recent NASDAQ and DJIA blood bath as a buying opportunity and I think we'll see a little upside action for a bit. Technically speaking, both the NASDAQ and DJIA are at the .5 Fibonacci retrace level with the USD moving up while oil and gold are moving down. (FWIW - I called the recent drop in gold correctly but "Past performance does not guarantee or imply future success", etc. etc)




              Edwards '08 tees!

[BooScout]

7. World markets have had the.....

Biggest one day drop since 9/11. I don't necessarily think trading will be suspended tomorrow on the Dow Jones or Nasdaq but you can bet it will go down a lot and volume will be very heavy as it catches up to the rest of the world.

[AlCzervik]

9. why is tomorrow predicted to be so bad, are there earning reports coming out?

[BuyingThyme]

11. Markets are down globally in response to dire predictions about the US economy.

[HereSince1628]

12. Big drops today in markets around the world.

If you go to Yahoo's Finance page you can look at the damage there. http://finance.yahoo.com/

[AlCzervik]

17. i just looked, not pretty. Does anyone remember the % drop when it crashed in 87?

[inanna]

19. It was over 20% if I remember correctly.

[HereSince1628]

20. This from Wikipedia...I make no statement to its veracity...

The crash on October 19, 1987, a date that is also known as Black Monday, was the climactic culmination of a market decline that had begun five days before on October 14th. The DJIA fell 3.81 percent on October 14, followed by another 4.60 percent drop on Friday October 16th. But this was nothing compared to what lay ahead when markets opened on the subsequent Monday. On Black Monday, the Dow Jones Industrials Average plummeted 508 points, losing 22.6% of its value in one day. The S&P 500 dropped 20.4%, falling from 282.7 to 225.06. The NASDAQ Composite lost only 11.3% not because of restraint on the part of sellers but because the NASDAQ market system failed. Deluged with sell orders, many stocks on the NYSE faced trading halts and delays. Of the 2,257 NYSE-listed stocks, there were 195 trading delays and halts during the day. <2> The NASDAQ market fared much worse. Because of its reliance on a "market making" system that allowed market makers to withdraw from trading, liquidity in NASDAQ stocks dried up. Trading in many stocks encountered a pathological condition where the ask price for a stock exceeded the bid price. These "locked" conditions severely curtailed trading. On October 19th, trading in Microsoft shares on the NASDAQ lasted a total of 54 minutes.

The Crash was the greatest single-day loss that Wall Street had ever suffered in continuous trading up to that point. Between the start of trading on October 14th to the close on October 19, the DJIA lost 760 points, a decline of over 31 percent.

The 1987 Crash was a worldwide phenomenon. The FTSE 100 Index lost 10.8% on that Monday and a further 12.2% the following day. In the month of October, all major world markets declined substantially. The least affected was Austria (a fall of 11.4%) while the most affected was Hong Kong with a drop of 45.8%. Out of 23 major industrial countries, 19 had a decline greater than 20%.<3>

Despite fears of a repeat of the 1930s Depression, the market rallied immediately after the crash, posting a record one-day gain of 102.27 the very next day and 186.64 points on Thursday October 22. It took only two years for the Dow to recover completely

[AlCzervik]

22. thanks.

[FarCenter]

24. They have one more session tonight before US opens Tuesday

Due to the location of the date line, Asian and European markest have all day Tuesday to drop more before the US opens Tuesday.

[HereSince1628]

25. That's true.

It'd be awful for us to have them do two consecutive days like this. I guess we'll start to find out late this evening and in the overnight.

[rockymountaindem]

13. Foreign markets were all in the toilet last night and today n/t

[regnaD kciN]

32. Mainly because the market's been closed since Friday...

...and the other markets around the world, which have remained open, all got hammered. According to current futures trading, look for the Dow to open 500-600 points lower than Friday's close. Where it goes from there, nobody knows.

[Rex]

16. The dreaded 'slinky' effect.

Die by inches.

[CJCRANE]

18. + the dreaded "piehole effect".

Everytime * opens his mouth to talk up the economy global markets plunge. Someone please tell him to STFU.

[BuyingThyme]

23. That really is the case, isn't it?

[mtnester]

21. Is there a choice called

don't watch? Stay away from all news outlets?

Don't tase me bro?

They are all the same and are good advise for tomorrow.

Oh well...my annual pension statement that is in the mail is most likely crap...I better get the one out from 2001 again.

My grandmother had to go back to work after her pension dumped in 2001 (I just took my statement and hid it from my own eyes..it was better that way trust me)...I suppose I can at least work as long as she has (oops...is)

[BuyingThyme]

26. kcik

[BuyingThyme]

27. ..

[BuyingThyme]

28. ..

[alfredo]

29. 600 to 800, pretty much in line with the rest of the world at this time

of night.

[BuyingThyme]

30. Snapshot results, Tuesday 3AM Eastern:

There won't be one. Relax! (16 votes, 21%)
DJIA down between 200 and 400. (15 votes, 20%)
DJIA down between 400 and 600. (17 votes, 22%)
DJIA down between 600 and 800. (3 votes, 4%)
DJIA down between 800 and 1000. (4 votes, 5%)
DJIA down 1000 or more. (2 votes, 3%)
Trading will be suspended before it plays out. (19 votes, 25%)

[2hip]

31. There will be no crash

"But foreign markets and futures trading historically have been unreliable predictors of U.S. stock action. Foreign markets typically react to developments in the U.S., rather than the other way around.

snip

Today's U.S. trading is likely to be influenced by a new batch of profit and economic reports. Ambac Financial Group Inc.,Apple Computer Inc., Bank of America Corp., DuPont Co., Johnson & Johnson and Wachovia Corp. all are scheduled to post quarterly results today. If U.S. stocks rebound, foreign markets could well follow."

http://online.wsj.com/article/SB120096287671805087.html?mod=googlenews_wsj





Edwards '08 tees!

[regnaD kciN]

33. As of this moment, pre-opening (futures) trading on the DJIA...

...as resulted in the average dropping 471 points since the close of business Friday. Actually, that's up a bit in the past few minutes, as it was down 521 points before I started reading this thread. But it would still suggest that the market will open at least 400 or so points down. Maybe not a 1929- or 1987-style "crash," but not a good day for anyone involved with the market, either. I would personally guessimate that it's less likely that the Dow will be at or above Friday's close by the end of business today (i.e. a recovery) than that it will be down 1000 points or more (a mini-crash, at least). More likely, it will be a smaller amount above or below the current -471.

[KharmaTrain]

34. They React To Our Markets...Not The Other Way Around

I learned this one in the 1987 crash...the markets in Asia continued to crash after ours bottomed. The Asian financials are still more dependent on our economy than we are on theirs. If our consumer market goes south, they not only lose a big customer but the scepter of their own social unrest comes into play. People wonder why the Chinese lend us so much (of our own) money...it's to keep their own economy busy so people are making bad dog food and not revolution.

The European markets are stable and some are up...more indicative of what I suspect we'll see today. I don't think we're "out of the weeds" here, but that if there's a fall in the market, you'll see a quick rush early on to pump money and "buy a bottom"...keep the sell-offs from driving prices further down and create a "mental boost" for the market that may even show a slight gain. Again...it's short term as the underlying messes that have created this downtrend continue to erode the consumer and middle class.

[HughMoran]

35. So, who was right so far?

:D

[BuyingThyme]

36. Relax!

[HughMoran]

37. Yeah, relax is the themeq

So far my kids college fund hasn't dwindled to nothing.

[HughMoran]

38. HALF HOUR TO GO!!!

I'M SERIES!!1111!!!

[HughMoran]

39. So what's the answer? There was no 100-200 point choice

:o)

[onenote]

40. The answer is that anyone who looks to DU for investing advice is a fool

As might be expected, 75% of those who participated overestimated the loss.

[Lone_Star_Dem]

41. True, but...

If Bernanke hadn't rode to the markets rescue with a .75 rate cut, today would have ended very differently.

That it ended where it did after that extreme a rate cut is telling of the state of our economy and what the Feds can and cannot do to repair the problems.

[BuyingThyme]

42. Relax!

[HughMoran]

43. Relax!