8 Points And More On Yesterday Plunge

Taken from the http://www.thereformedbroker.com/ : There Had to be a Second Trader…On the Grassy Knoll, Perhaps?

1. For starters, let's all keep in mind that these things don't happen in a healthy tape. The jitters from Greek rioting and possible contagion were the necessary preconditions for a crash like that.
2. The "Fat Finger" thing is nonsense. Maybe someone made a sizable error, but one cannot deny the fact that the algo-driven tradebots poured gasoline on the fire. The machines were triggering stops and wrecking everything in sight before human beings with qualitative senses could get a handle on what was happening. Congress is planning the hearings as we speak.
3. For me to enter a sell order for a retail brokerage client of 500 shares of Microsoft ($MSFT), I need to go through 3 screens of verification and order confirmation. How is it possible that someone with the clearance to sell 16 billion shares of the S&P Spider could even have a typo? If I have 3 screens to confirm a trade, how much order verification does he have?
4. Look at your keyboard...the "M" for million is not even next to the "B" for billion. There's an "N" in between the two keys. Dude, how fat is your finger?
5. If you were intentionally trying to chase the last of the individual investors from this market you couldn't have written a better script than "accidental trade vaporizes trillions in value from US stocks". People are just disgusted already.
6. Cramer was so money today. Whatever you think about him in general, he's the guy that came on CNBC down 1000 and told you that these were fake quotes, to go buy Proctor & Gamble ($PG) down 20 points. He was cool, calm and perfect in that slot.
7. We still don't know whether or not any of the trades from that session will be unwound by broker/dealers. There were a ton of stop loss orders hit and people missed fills entirely in many cases. We should hear about that soon. Let the bickering begin!
8. Anyone who told you he bought down 1000 is lying to you. Bids were raised off those levels in seconds.

Another article from TraderMike: May 6, 2010 Recap: The Day the Market Broke

• There’s a lot of talk about some fat-fingered trades and technical issues causing that steep drop but I think that’s masking deeper, fundamental issues. Currencies were trading wildly all day, well before the 2:30 debacle in the stock market. Even Dennis Gartman said he’d seen nothing like those currency moves in his 30+ years of trading. I watched a lot of CNBC tonight and most of the talk is about what can be done regulation-wise to prevent the kind of slide we saw today. It made me flash back to October 2008.
• So back to the more fundamental stuff… The focus really needs to be on what’s going on in Europe and the possibility of global contagion. This afternoon CNBC had live coverage of a stand-off between Greek police and protesters of Greece’s newly passed austerity package. It seemed to me that as soon as the police surged to disperse that particular crowd is when the selling really got going. That’s what got the Dow from down 150 to down 300 or so. It’s anybody’s guess as to what caused the rest of that 10% slide. But let’s not celebrate because we ended down *only* 3%. Serious technical damage was done today. There’s also some talk that the market will *have to* test today’s lows based on what’s happened in the past. So this is certainly a time to stay on your toes — long or short. Fast market situations like today can be quite treacherous.
• Worden was in rare form in tonight’s report, so I thought I’d share what he had to say. (Emphasis is mine):
  The Computers Did It!?!?
  I suggest you forget all this nonsense about the glitches in computers and software being the true culprits behind today’s near collapse. Today’s mentality would lead to charging the NYSE with fraud.
  The market has been waiting for something like this to happen since the bottom in March of 2009 occurred, over a year ago. Why? Because this is the way primary bear markets end. The market has to prove itself before a bear can advance into a bull market once again. It can only prove itself by going up and down a number of times until it becomes clear that it has the strength to go on to better things. It does this by providing comparisons with preceding trends in the opposite direction.
• I should point out that the capitulation we saw today could be followed by repeated shakeouts of the same type. The first shakeout is almost invariably followed by at least one more shakeout. A series of shakeouts eventually form themselves into any one of many possible bottom formations, and the breakout above that designates that the bear is dead.

Here's an article by Bob Pisani arguing Why the Trades Were Clearly Erroneous