Yes, the market has been over-bought.
Yes, the market should decline due to Greek debt problems.
Yes, I’m not personally very bullish on stock markets at all.
But dropping 1000 points (including previous 200 points decline earlier) in less than 5 minutes?? Something has gone very very wrong today.
As it happened in front of my screen, I was immediately puzzled by the relatively low volume accompanying with it. Normally such huge decline is always accompanied by HUGE volume. But NOT this one.
Going back and reviewing the trading history of some stocks, I found that there were two stocks (and according to stock exchanges that there were MANY more) whose trading were simply absolutely ridiculous. They were ACN and SAM.
ACN (one of the best consulting business) was trading at about $40, and then it went down to $0.01. SAM (beer company) was trading at about $56, and then it went down to $0.01. You would think that they were simply incorrect data passed between computers, but NO, some actual trades really happened at $0.01. Please see all the screen snapshots that I have captured from finance.google.com, quote.yahoo.com, scottrade.com, tdameritrade.com, firstrade.com below at the end of this post. Some or all of the data you won’t be able to see them ANYMORE because NYSE/Nasdaq have decreed to cancel all orders beyond 60% drop between 2:40pm and 3:00pm, possibly realizing that the “fraud” has gone too far, and they want to erase all evidences.
How can those stocks dropped to $0.01? My explanation (which is just a plausible explanation based on my knowledge, and please judge it yourself) is that the only possibility is that market makers for those stocks simply stopped making the market, and pulled ALL the bids, and let all the stop-loss market orders to execute at the worst possible price which is obviously $0.01 per share. In my opinion, what occurred today is Wallstreet terrorism. For stocks such as ACN ($27 billion market cap) and SAM ($800 million market cap), there are usually more than 1 market maker. To have no bids from market makers, they MUST have colluded together at the same time. As long as there is collusion, making stocks dropping to $0.01 is possible for several seconds.
1. Since you are the market makers or professional traders, you see ALL orders (or at least through level-2 quotes). You know exactly how many shares of market sale order to CLEAR OUT all limit orders at any instant.
2. Then you proceed to clear out all limit orders in a lightening speed, creating a vacuum of bids.
3. Supposedly at this time, market makers should come in, and offer some reasonable bids. But what happened is that since there is no actual bids, but very likely tons of stop-loss market sell orders triggered by the sudden drop in price, you have sell orders, but no buy orders for probably 1 minute.
4. Then now if the stock in question is one of those 30 Dow Jones stocks, you can basically SET the price by offering your buy order at a preset desired ridiculous price, which could cause the desired amount of Dow Jones drop, and triggering EVEN more stop-loss orders, and more panic selling orders.
But I guess that before “they” pushed the Enter button in executing the trading program, they forgot to set a reasonable price for ALL the stocks. The drop was happening for almost all stocks all simultaneously. I think only the stocks that had too many bids, and would be too costly to perform such manipulation, were dropping in a more “normal” fashion.
Come on, people! A 16 million or 1.6 million sell order, mistaken as 16 billion or 1.6 billion sell order is simply NOT possible in P&G, the supposedly “guilty” stock that triggered the drop in Dow Jones. Today the total volume for PG is 28.6 million shares. If all shares were traded at $61, that’s only 1.7 billion dollar. We know for a fact that majority of the today’s trading didn’t happen at the $55 or $40 range. WHERE is that 1.6 billion sell order getting filled under “normal” trading without glitch????
Again in my opinion, the ONLY way for today’s market actions is for ALL market makers to collude and walk away AT THE SAME TIME, AND bring in all the necessary market sell orders to clear out buy limit orders that has been put in, and then once everything is cleared, they can set ANY price (well, for just several seconds or minutes). Checking the trading tape for today, the volume for PG during those 2 minutes sell-off (& coming back up) is only 764600 shares, when today’s total volume is 28,565,275, and the volume per 5 minutes for the last twenty minutes are 741400, 546000, 742200, 588000 shares. Those 764600 shares (almost half of which are up-volume) are NOT big sell orders at all. The only way it could have worked is through super-fast computer trading clearing out & triggering stop-loss market orders. That is Wallstreet Terrorism at work.
I did a rough calculation using Dow divisor as 0.13. One only needs to hand-pick 4 or 5 stocks to cause Dow to drop 500 points today. Among today’s suspicious trading, PG dropped from $62 to $39.37, but it’s showing $56 now everywhere. MMM dropped from about $84 to $67.98. CAT dropped from $63.5 to $58. BA dropped from $69 to $62. HPQ dropped from $48.5 to $41.94. That’s 450 points of Dow Jones dropped right away (on top of previous some 200 points).
These are just NOT normal tradings at Wallstreet, and scared politicians are going to re-think their flimsy financial reforms now?? Why is that after almost 2 years, NOBODY from Wallstreet has gone to jail for all the mortgage crimes??
Oh, I forgot. This is the America, where money speaks louder than anything else.
Screen captures from 5 different data sources are here for ACN. I couldn’t get the real data from WellsFargo, since they have already “erased” the suspicious trades from their system. For TDAmeritrade and Scottrade screens, I’ve placed my mouse cursor at the interactive charting, so that it will show the volume and price range at that cursor position:
Screen captures from 4 different data sources are here for SAM. I’ve placed my mouse cursor at the interactive charting, so that it will show the volume and price range at that cursor position:
Here are just two screens showing that PG traded below $56 for many actual shares in only 2 minutes: