Trading glitches & unrest in Europe making it tough on investors

Posted By on May 7, 2010

dowdailychart100506If the whipsaw moves in the stock market didn’t make you sick to your stomach today, then you’d make a great bluewater sailor. I’ve followed the market as an investor and occasional daytrader since the crash of 1987 and I don’t ever recall as rapid a selloff as we saw Thursday marketsdown100506afternoon.

As I was driving between sales calls and checking the market on my Palm Pre (screenshot below), I notice the market going south at about 2:40 p.m. Minutes later the DOW took a breathtaking 998- point drop as I pulled over to tune into the financial news on my computer. palmpreexpressstocks100506 By the time I could log in the collapse below 10,000 saw buy orders push the oversold panic back to levels bring the market close to “just another lousy day for investors.” Markets all closed down, but not as bad as it could have been.

Most pointed their fingers at the situation in Greece where rioting continues in protest – link. Today’s action inflamed protestors even more as their parliament passed a package requiring deep cuts to government services, government paychecks and government controlled retirement pensions — one of the many problems with over promising socialist political system (don’t get me started on the road the U.S. is ‘currently’ heading down!).

The last few days has seen selling in the face of unrest in Europe, but today it was near panic … or what many on Wall Street are blaming on “trading glitches.”  (part of WSJ article below)

The Securities and Exchange Commission and the Commodity Futures Trading Commission said they were working with other regulators to review "unusual trading activity." The major U.S. stock exchanges said they were looking for trading glitches and examining potentially erroneous trades in multiple stocks. Major exchanges said they will cancel erroneous trades that occurred during the selloff.

Multiple stocks, ranging from Accenture PLC to Boston Beer Co., momentarily lost nearly 100% of their value, changing hands for just one penny. Exchange-traded funds, which are index funds that trade like stocks on exchanges, were also temporarily vaporized. The $9.5 billion iShares Russell 1000 Value Index Fund went from $59 to around 8 cents in the blink of an eye.

"It happened so quickly, it was like a torpedo," said Scott Redler, chief strategic officer at T3 Capital Management, a hedge fund. "It was mayhem."

Unnerved traders frantically searched for an explanation, scouring the trade blotters for clues to the cause. Many pinned the blame on an erroneous trade for a basket of stocks which caused shares for companies such as Procter & Gamble Co., one of the market’s most stable blue-chip stocks, to fall 35% in two minutes.


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