The Dow's Scariest Hour: The Last One
Maybe the Dow should stop trading at 3 p.m.
Or maybe the New York Stock Exchange should just ring the closing bell at an unannounced point every day, when it looks like stocks have hit their peak. Surprise -- trading's over!
Either way, the last few days have made this fact clear: The Dow's last 60 minutes of trading each day are its most volatile.
Today, the Dow declined all day, but it was sort of a steady decline.
But at 3 p.m., as if someone had flipped an unseen switch, the Dow dropped off the table, losing more than 200 points in the last 60 minutes of trading to close down 733.08, turning a bad day into a terrible one.
Today was not an isolated instance.
During last week's massive sell-off -- the Dow's worst week ever -- the big losses came in the last hour of trading. On Thursday, for instance, the Dow was down 221 points at 3 p.m. Then it shed an additional 458 points in the last hour of trading, just like that.
Even on Monday, when the Dow roared back with an out-of-its-mind 925-point rally, the index shot up 322 points in the last hour.
What's going on?
First off, there's panic.
On a big-loss day, mutual funds need to sell stock to pay off worried investors who want cash.
On a big-gain day, investors who've sat on the sideline all day hoping the rally would abate and prices would come down, exposing values, finally give up and jump into the buying rally, pushing it higher.
And on most days, up or down, many large institutions, such as index funds, hold their trades until late in the day, which causes swings if only because of the large volume of shares they are dumping into or extracting from the markets.
-- Frank Ahrens
Posted by: Q: Selling Late? | October 15, 1908 5:35 PM | Report abuse
Posted by: Beau James | October 15, 1908 5:49 PM | Report abuse
Posted by: Tony | October 15, 1908 6:22 PM | Report abuse
Posted by: Beau James | October 15, 1908 7:36 PM | Report abuse
Posted by: Frank Ahrens | October 16, 2008 10:00 AM | Report abuse
The comments to this entry are closed.