1987's 554 point drop cannot be duplicated because of the circuit breakers built in, but even with "trading restrictions" the market can still drop the 2500 points (1987's equivalent today), but just not in one day.
I'm too lazy to go do the research. A good HP'er would tell us all how the circuit breakers work, how much the Dow can fall in one day, and a good link or two
Ah, the days of "Terror Alert Raised" (here comes an election - you just know what the Administration is gonna do again) and "Circuit Breakers in Effect" (we're crashing by October - I'll go out on a limb). Ready for some 2001 deja-vu all over again?
May 21, 2006
You heard it here first (again). Get ready for these words: "trading restrictions in effect"
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26 comments:
i'd rather be out now, and buy back at the sale price later on
same with housing
and yes, I feel stocks and housing are great investments long term - but not when you buy high and sell low, and great as long as you have the ability to hold for a long time
People lived through the great depression without loosing their shirts also. Even though the dollar is devalued and allegedly being dumped, I see allot less disposable income. People are pulling back spending in my retail shop in Los Angeles and my wholesale customers are pulling back. I also see many more for sale signs all of a sudden. I have been glad for the past few months that I did not have the $3500 mortgage for the bigger house we were looking at when things were good. I would not be making the payment this month. Whew!
Similar thoughts...
http://www.timesonline.co.uk/article/0,,2095-2189601,00.html
Circuit breakers...
http://www.nyse.com/Frameset.html?nyseref=&displayPage=/press/circuit_breakers.html
Keith - you still standing by your Dow prediction of 8800 on December 31, 2006?
The Fed cant stop raising rates, the Japanese and chinese will dump their dollars immediately, maybe go to the Euro, stock market crash is pretty much a given, and holy crap look at Phoenix!
http://www.benengebreth.org/housingtracker/location/Arizona/Phoenix/
I have a metal commodities mutual fund and went from making a killing to taking a pounding (still up slightly).
No investment seems safe at this moment...?
well well well...is there anyone who thinks that circuit breakers will make the hall think worse-off?
Remember that the circuit breakers scheme was an irrational mechanism that was put in plase so as to stop other irrational trading mechanisms that were in use during the '87 crisis.....
"Keith - you still standing by your Dow prediction of 8800 on December 31, 2006?"
yes.
man, it's amazing you put this post up and then circuit breakers get hit in india today - first time we've seen them in a long time
when will the USA get their taste again? this week?
There is a name for the "i'd rather be out now, and buy back at the sale price later on" strategy, its called timing the market, and most people who try to do it wind up underperforming. That doesn’t mean that every HP reader will loose money timing the market, it just means that most of you will.
I don’t know why so many people would make a bet that you are more likely to loose than to win, but hey what do I know, casinos are always full aren’t they?
Many people think they are like Liono from Thundercats, you know, they cat-man who raised a sword up to his face and thus gained “sight beyond sight” but I for one do not have sight beyond sight, I can’t time the market and win. I don’t spend my days pouring over the research and the trends, and even if I did, I think most of us realize that the pump-and-dump wall street elite manipulate the market in ways both subtle and obvious. The stock market can be a powerful tool for the well disciplined, but you will loose your shirt by always following the herd.
Thinker said: The stock market can be a powerful tool for the well disciplined, but you will loose your shirt by always following the herd.
I say - go aganist the heard. if they're all buying, sell. If they're all selling, buy
If you stood in line with the other fools last summer to get in on that hot new condo development, you got killed.
If you believe the market never drops and you're in there buying right now, you're gonna get killed
it's contrarian to be negative right now, so I am. When it's contrarian to be postitive, I'll be that.
I followed the link to "look at PHX" and saw another little Freddie link. Interesting stuff.
http://www.freddiemac.com/speeches/syron/ds120605.html
The speech was made in early Dec last year. Wonder what would be different if he was doing it today. In PHX or San Diego or NoVA?
agreed people are pulling back, as an example. I went to my local home depot this weekend (no not consuming just out and curious) and to be frank I was very shocked. I got a parking space right up front.
Now mind you in past years you would have had to park 500 feet away and still look for a spot to park.
The HD was very slow and other than the self check out, 2 registers were open.
And the poeople that were there were pusing around empty carriages.
aFter walking around just looking and pricing things (the cost of materials is enough to gray your hair if your in the middle of as major project)for one hour I seen no steady stream of consumers at all just browsers such as my self.
Funny thing real quick..even the clearence rack prices are high enough to make you run for the door..
There you have it sign of the times I guess.
>> I went to my local home depot this weekend (no not consuming just out and curious) and to be frank I was very shocked. I got a parking space right up front.
You must be in another part of the country. I'm here in Columbus, OH, went to Home Depot on Sat. morning, and the lot was PACKED.
I think autofx has it right. The Federal Reserve will not allow a stock market or a housing market melt-down. Bernanke has stated many times that he is ready and willing to intervene to maintain "orderly markets" and "price stability"
They will tolerate a certain level of pain, then the morphine injections ($$$) will start. The big guys at Citi , BoJ, and Chase know this and probably have the programs ready to roll once they get the nod.
You must be in another part of the country. I'm here in Columbus, OH, went to Home Depot on Sat. morning, and the lot was PACKED.
Yes New England, Where an overpriced house will put you in the bread line.
But i can see the Home depot in Ohio Being packed, after GM and all the other auto giants move on, you should be able to buy a house there for about $10,000. Just a prediction of course.
The FED has no control at this point, none! Inflation is out of control, if the FED continues to raise it will crash the housing bubble and the stock market, if they dont the Japanese and Chinese will sell their dollars, raising interest rates, crashing the stock market and housing market.
It's gonna be a great party watching these idiot McMansion SUV driving, arm adjusting losers try to file BK, only they cant!
WalMart yesterday was packed although I've noticed they are pretty slow during the week, and the store I'm visiting is the busiest store in the chain. What can you tell from what I just said? Nothing.
It's hard to speculate on the direction of the economy solely based on retail sales. Looking back after 9/11, every store was empty for weeks on end. Yet we were pulling out of recession just two months later. It could be related to the GM "keep America moving" campaign but it's a little more than that.
Looking at this summer, it appears that GM, Ford, and the airlines finally have some pricing power. Maybe it's not as bad as it seems.
we're crashing as we speak.
yes it is down 60 as we speak!
The trend is down baby!!!!
Gotta love it.
Anyone buying? Oops, you just lost money on that purchase.
The following was posted yesterday on Motley Fool, with me adding in percentages:
(snip)
A "circuit breaker" or "collar" generally refers to any method used by an exchange to avert panic selling during a large sell-off. These devices came into use to reduce market volatility and restore investor confidence after Black Monday, Oct. 19, 1987, when the Dow dropped 22.6%. The specified trigger levels are adjusted periodically by the exchanges to reflect market characteristics. The NASD follows the lead of the NYSE and halts trading in Nasdaq accordingly.
For this quarter, if the Dow declines 1,100 points (10%), trading stops for one hour if triggered before 2:00 p.m., or for 30 minutes if triggered between 2:00 p.m. and 2:30 p.m. No halt is imposed after 2:30 p.m. If the Dow declines 2,250 points (about 20%), trading stops for two hours if triggered before 1:00 p.m. or for one hour if triggered between 1:00 p.m. and 2:00 p.m., and the market closes if the condition occurs after that time. A 3,350-point (about 30%) decline closes the market for the day regardless of the time it occurs.
What actually occurred yesterday was a "trading collar" in NYSE jargon, imposed if the NYSE Composite Index (NYSE: NYA) swings either up or down 160 points. If that occurs, all index-arbitrage orders (buy orders in an advancing market, or sell orders in a declining market) of the S&P 500 stocks must be stabilized for the remainder of the day. Once the NYA moves back to within 80 points of the previous day's close, the collar is removed.
Motley Fool on Monday cited a definition of stock market circuit breakers. I added in percentages.
A "circuit breaker" or "collar" generally refers to any method used by an exchange to avert panic selling during a large sell-off. These devices came into use to reduce market volatility and restore investor confidence after Black Monday, Oct. 19, 1987, when the Dow dropped 22.6%. The specified trigger levels are adjusted periodically by the exchanges to reflect market characteristics. The NASD follows the lead of the NYSE and halts trading in Nasdaq accordingly.
For this quarter, if the Dow declines 1,100 points (10%), trading stops for one hour if triggered before 2:00 p.m., or for 30 minutes if triggered between 2:00 p.m. and 2:30 p.m. No halt is imposed after 2:30 p.m. If the Dow declines 2,250 points (about 20%), trading stops for two hours if triggered before 1:00 p.m. or for one hour if triggered between 1:00 p.m. and 2:00 p.m., and the market closes if the condition occurs after that time. A 3,350-point (about 30%) decline closes the market for the day regardless of the time it occurs.
What actually occurred yesterday was a "trading collar" in NYSE jargon, imposed if the NYSE Composite Index (NYSE: NYA) swings either up or down 160 points. If that occurs, all index-arbitrage orders (buy orders in an advancing market, or sell orders in a declining market) of the S&P 500 stocks must be stabilized for the remainder of the day. Once the NYA moves back to within 80 points of the previous day's close, the collar is removed.
Enjoyed reading your blog.
Regards,
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