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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

By Frank Ahrens  |  October 15, 2008; 3:38 PM ET
Categories:  The Ticker  
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Comments

Hey Frank -- Why do the hedge fund types wait until late in the day to buy or sell (especially sell)? Based on the trends we've seen recently, they would get much better deals (buying or selling) at mid-day, after the morning vol, but before the bloodletting at 4 pm!

Posted by: Q: Selling Late? | October 15, 1908 5:35 PM | Report abuse

A Coke is still a good deal. They opened up my vein and found out that my blood is real expensive, but I got more. Bleed to death scumbags. I'm going to have a drink and get alcohol blood content back up to where I can think. A lot of red ink covering everything isn't there. So what. Go out of business. Sometimes less is more. Now the vampires are dying. Die faster.

Posted by: Beau James | October 15, 1908 5:49 PM | Report abuse

I noticed that the market has come close to a 10% decline many times. I think at a 10% drop that trading is temporarily halted. Specifically toward the end of the day, there seems to be a major sell-off rally that is always less than 10%. Just an observation, and not a subscription to a conspiracy theory. However, I wonder if there are any smart and caring people in Congress that are observing the same thing.

Posted by: Tony | October 15, 1908 6:22 PM | Report abuse

Your water is going to be rationed, cities destroyed and farmlands laid to waste. Not much you can do about it. Sit around and worry, make yourselves sick even if you can't change it. Have a debate and give a bunch of money to Wall Street so they can politic. Run around Washington, it's a total bust. Look at the upside. The terrorists have it worse still and the global drug thugs are having credit problems. Who's going to fund the terrorists now? What now? They are going to save us from them. Take care of yourself.

--------

Posted by: Beau James | October 15, 1908 7:36 PM | Report abuse

Hi, Q: Selling Late -- that's a good question and I'll try to get at it today. September was the worst month on record for hedge funds and I want to blog that. Let me see if I can get the answer.

Posted by: Frank Ahrens | October 16, 2008 10:00 AM | Report abuse

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