He added: “If you want to believe that some bureaucrat in China changing the margin requirements for local speculators as the cause of the US sell off, then go ahead. Me? I prefer to believe what is right before my eyes: Decaying economic fundamentals, a complacent market that is overbought and way overdue for a correction.”
TickerSense has the stats. The 416 point decline represents the seventh largest point decline in its history - and ends a streak of 1,098 days without a top ten point gain or loss, the fourth longest stretch since 1920. But there is some hope. While only two of the S&P 500 stocks ended Tuesday up, the third worst reading in the past 10 years, after the weakest days since 1997 on this advancers/decliners measure the index has gone up the following day 73 per cent of the time with an average gain of 1.19 per cent.
Eddy Elfenbein at Crossing Wall Street thinks we’re all getting a bit carried away. “Oh, boo hoo, people! You think this is crash? Please, this ain’t no crash.We’ve become so used to no volatility, we forgot what a normal market acts like. I’m sorry, but this was nothing compared to the olden days, say 1999. Yesterday may have been the worst day in four years, but going back ten years, it was ranks just twelfth. Twelfth, people! Back then, we would have laughed at this. Four hundred points? Please, that was a lunch break. There were three days worse than this in August ‘98 alone.”
On the China question, he is sceptical. “Let me get this right. My portfolio took a hit because of the Chinese National People’s Congress? Talk about globalization…..I’m sorry, but I can’t accept that some Communist bureaucrat is the reason for the loss of half-a-trillion dollars. What kind of connection does a company like Graco have to Shanghai margin requirements? Outside the occasional takeout, I’m guessing it’s pretty slim.
“Here’s the most telling fact about yesterday: There were 4.24 billion shares traded on the NYSE; 4.19 billion was down volume, just 45 million was up volume. That wasn’t a typo, 45 million. Declining volume led advancing volume by more than 93-to-1. Declining issues led advancers by more than six-to-one. This was no boat accident. And it wasn’t China either. It was a broad-based sell-off.”
Trader Mike seconds that, and runs through the charts. “The selling was broad-based today [Tuesday] — 89% of Nasdaq stocks were down and 84% of NYSE stocks declined….I’ve said before that this move higher felt like a game of musical chairs and today the music seems to have stopped for real. There’s a whole lot of technical damage in the indices. All the indices crashed through their 50-day moving averages today.”
Over at 24/7 Wall Street, there’s a feeling of wide-eyed wonder: “We can blame China, we can blame a horrible Durable Goods number, we can blame ex-FOMC head Greenspan for hinting at the risks of a recession. Blame whatever you want, but the selling built and built and when the NYSE trading curbs were lifted the market took a bungee jump. ”
Plus they have a few choice words after the troubles on Wall Street - a sudden 200 point drop in the Dow was caused by a snafu in the mechanism that calculates the average. By late afternoon traders reported having problems sending electronic buy and sell orders to the NYSE, says the WSJ. Traders went back to basics, resorting to writing buy and sell orders on a white board.
“This was a record day on NYSE volume and the system froze on many stocks. John Thain’s argument for eliminating the trading floor without people just got hosed, and rightfully so. In a FLOOR BROKER world alongside electronic trading they are obligated to maintain a somewhat orderly market,” writes John Ogg on 24/7 Wall Street.
Finally - Slate.com’s Daniel Gross has a nomination for the ‘Great moments in magazine covers.’ From the current cover of Forbes, “Has the bull market just started?”
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