>- Trading halts are there to let people catch their breath, supposedly. More likely it's in order to be able to announce news, because without news what's gonna change?
Wouldn't the change be, "people have caught their breath?"
If the free fall is sustained by emotional panic, then halting the emotional panic can help stop the free fall.
> Seems strange that the market is kinda able to be manipulated like that.
You might consider it manipulation, but these circuit breakers have been in place for a long time now, IIUC ever since the major market crashes of the 80s when there was no way to slow down the drop. The idea is to potentially lessen panic selling by allowing more time for more information to come to light which might mitigate some of the volatility.
Of course, there is no guarantee that better news will surface in the meantime, but even if the eventual slide will be much larger, its better that it takes place over several days to allow counter-measures to be put into place.
> You are trying to SELL SELL SELL because all countries worldwide are feeling some economic pressure and you can't because the exchange is down.
Some exchanges deliberately close in those circumstances. Or when big news is about to be released.
But as much as people were unable to sell, there are nearly as many situations where being unable to sell is a good thing.
I guess we’re eventually going to argue for 24/7 stock exchanges and for some reason very few are.
My own experience in Canada is that a lot of big Canadian stocks also trade in NY, and when one market is closed and the other isn’t because of different holidays, not a lot happens.
I guess an unexpected crash is different, but my guess is that everyone takes the day off, avoids releasing any big news out of respect for the situation and gets back to it tomorrow.
> I know that if I sell as the market is going down, I may well encourage other people to sell. The market may plunge and all of my stock will be worthless. If I buy at a crucial time - when the market has paused in the process of dropping, I may well influence the market to go up instead.
That is simply not how the market works. Trying to buy when the market has "paused" is not going to trick the other market participants into thinking that the market has bottomed out and the crash is over and that everyone should start buying again. Volatility in a bear market is normal, and the stock market going up for a couple days in the middle of a crash is not going to convince anyone but the most gullible retail traders that the crash is definitively over.
> but if it is true that 10% of the population controls 86% of the stock
Panic is almost never the correct reaction. Deciding that there's going to be a downturn and you should prepare yourself for it financially is one thing, but under what circumstances would it be optimal for you as an individual to panic-sell?
In my mind, panic is the thing you do when you realize that you haven't prepared. That you don't have enough resources for an extended downturn, that you're financially over-leveraged, and that you are in danger of losing your home and being unable to feed yourself and your family. There are TONS of people who are experiencing this right now in China and Italy, and many others of us who will be experiencing it the next few weeks in the rest of the world.
But panic also implies that you don't have time to fix that, and there's nothing you can do as an individual to change it. If that's the case, you probably don't have a lot of investments in the stock market anyway. Or if you do, and you're over-leveraged in the markets because you were gambling with your money instead of investing with it, then yes, you're panic-selling right now.
> We should not react to such news at all, it would solve the terrorist problem and the economic issues in one go.
That isn't how markets work and, more importantly, if you were to institute some policy that forced them to work that way, you'd get less liquidity. In my opinion, these shocks are a sign that the market is actually working properly.
As an aside, I know a lot of people who faded the move (remember, you have a choice!) and made quite a bit of money (smallest number I heard was $50k).
>Given the harsh economic reality, I'm very bearish right now.
as am I.
I've more-or-less frozen my trading until a) a recovery plan is clear and being executed or b) until it is more clear we've hit a real bottom.
All these hopeful spikes that do not correlate to the economic reality are probably going to throw a lot of people through hoops until any real roof or floor is hit.
It sucks because I keep having these "buy the dip" moments, but then I have to hand-wave the opportunity away knowing that whatever dip i'm looking at is likely one of many upcoming movements.
>Seeing stocks drop like that was not the best news to wake up to
This has always confused me. Are you day trading or holding positions where short term moves massively impact you? Or do you believe the entire market will actually explode? As someone with investments I honestly pay little attention to short term moves as I am investing on far longer time horizons. Or maybe I am just missing how the market going up or down after random event X impacts my life in any meaningful way or portends really anything. I do see how both sides like to claim the market is validating whatever they are currently trying to "sell", I think these people massively over-simplify "the market" and its moves, for obvious reasons.
> But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely.
Yes, you're basically right despite intending to be sarcastic. The circuit breakers are stupid and there's no real good reason for them to exist. Levine:
> The basic idea of stock-market circuit breakers is, like, some news happens, and the market reacts precipitously, and stocks fall 7%, and the market gets turned off for 15 minutes so that everyone can have some time to think and digest the news and see if they want to buy. On an average Tuesday afternoon, not everyone who might want to buy stocks is watching the market every minute. The computers are, sure, but some long-term investors are busy doing other things, reading 10-Ks or meeting with executives or whatever. Someone needs to call them up and say “hey not sure if you noticed but stocks are cheap now, you should buy some.”
> But you generally want to do this sort of thing through mechanical bright-line rules, and occasionally those rules get applied in kind of weird circumstances. The market did not fall 7% by 9:34 a.m. today because of shocking news that came out at 9:32! Investors had all weekend to ponder coronavirus news, and all of Sunday to ponder oil-price news, and they pondered it at their leisure, and futures traded limit-down, and then the stock market opened and investors applied their weekend’s worth of pondering to the market, with the result that the market shut down four minutes later. A weekend of pondering, four minutes of trading, 15 more minutes of pondering. I am not sure what you learned in the 15 minutes that you didn’t learn over the weekend.
Back to you:
> Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market.
The government didn't do that. It loaned $1.5T over a very short term to banks. It was not targeted at the stock market and had no impact there.
By which you actually mean "prices come down to earth," which is a good thing, just one that many powerful interests don't want to happen because they have bet against it.
> Since there really hasn't been a capitulation, where everyone who would ever sell actually sold, it's likely the bears are still in control.
I have heard this before, but I am having trouble feeling this. How do you determine capitulation? We had several days where trading was halted for a time due to steep losses, and 3/16 was the second biggest percentage loss in history (for the Dow at least).
If that isn't capitulation, what is? Hitting the 20% circuit breaker a few days in a row? Only in 1987 has the market fallen more than 20% in a day.
One reason I think the market is rising is because "everyone who would ever sell actually sold". Therefore, only the eternal optimists are left; the pessimists are sitting this one out.
Wouldn't the change be, "people have caught their breath?"
If the free fall is sustained by emotional panic, then halting the emotional panic can help stop the free fall.
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