Check this out from ‘The Big Picture.’
But what about the final thrust lower – the seeming air pocket? We know, thanks to our friends at CNBC who were fixated on this particular stock, that Proctor & Gamble tumbled by over -35% in the span of about 5 minutes. It’s impossible to tell by looking at a chart of the stock, but when you look at the individual prints you can see that this was not a case in which two or three “erroneous” prints marked the tape down to $39 before the stock sprang back to $60. I’ve got 28 pages in front of me of P&G prints that occurred between $39 and $50 per share and between 2:46 p.m. and 2:51 p.m. At 36 prints per page, that means P&G traded over one thousand times at those “crazy” and “surely erroneous” levels. I’m sorry, but that isn’t an error, THAT IS WHAT WE LIKE TO CALL TRADING.
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Well, yes. Even though, as Econbrowser points out, some of the 1 cent trades “are utterly irrational by any standard.”:http://www.econbrowser.com/archives/2010/05/staying_sane_in.html
I would say that there are a few messages in here.
Message #1: the portfolio that you though had a certain risk level before the plunge, has a greater risk level than you thought.
Message #2: A stock market of programmed computer instructions, trades differently than a market of people.
On a related note, one message may be the potential dangers of high-frequency trading, which now comprises 70%+ of the market. I am not convinced that it should be allowed at all, but I will want more evidence that it played an important role here before jumping to conclusions.