Tuesday, May 11, 2010

Big Picture: Closer look at Dow plunge

The Big Picture takes, "A Closer Look at the 1,000 Dow Plunge":

I was at 30,000 feet when the crash hit on Thursday. When I landed in NY and saw what happened, the first thought was trader error. But the evidence for that remains lacking.

I spent a good part of the weekend trying to track down evidence that it was HFT, or a fat thumb, or a NYSE erroneous trade halt.To date, the best analysis I’ve seen came from a young analyst on an institutional desk. His forensic approach to piecing together what occurred is the best explanation I have come upon:

We'll be taking a close look at this post, which ties the action in the US stock market together with the volume and selling patterns in the index futures and currency markets. As many of the more experienced market watchers suspected, there is much more to last Thursday's story than a random "fat finger" error-driven decline.

Thanks to Bear Mountain Bull for sharing this post from Barry Ritholtz' blog with us.