Dow Stock Market Prices
dow Stock Market prices
Nasdaq, SP500, Dow Jones Stock Market Review 7/17/07
Stock Market Plunge
On May 14, 2010 the US stock market plunged strongly down by beating all historical records. The DOW Jones Industrials, S&P 500 and other indexes suffered huge losses. Some public companies went down to pennies from $30 and higher. Later, media explained this event as a computer error, then as a human error, than the media announced that exchanges started to investigate this drop down and later everybody forgot about these unusual incidents.
When trying to understand events of the plunge it is recommended referring to the basics principles of The Stock Market price movements. The first and the most basic rule of the stock market is that price is driven by supply and demand. If a trader (investor) must sell a stock he or she sells it at market price. Now, if a trader must to sell 10,000 (ten thousands) shares of a public company he has to find a buyer who would buy these ten thousand shares. If there is not enough buyers to cover demand to sell ten thousand shares then the price of this stock goes down until there are enough buyers to buy these shares. Of course, the stock market operates by billions and 10K is relatively small number which does not greatly affect price of a stock.
The second point that has to be cleared is that there could be two situations: fist is when a trader wants to sell Stocks and second when a trader must to sell. In first case, if price goes rapidly down (plunges) an investor may change his/her mind and make a decision not to sell but wait when the traded stock recovers. Second case usually occurs when a stop-loss is hit or when a trader has received a final margin call. Whether it is a stop-loss or margin call it is not a trader who places an order to sell but a broker and in this case a position must to be eliminated (closed) at any possible market price.
Now, coming back to May 14, 2010 you may try to imagine that during the stock market decline big number of stop-losses was hit. I am not looking at situation with margin calls because in this case, as a rule, there are several days until margin is executed. When stop-losses are hit, brokers place orders to sell at market price. Now, because of an error in computer, or because of human error, as was only once mentioned in CNN “operator entered B (Billions) instead of K (thousands)”, or by any other reason there were placed orders to sell billions of shares. Since there were no buyers for such big volume of stocks, price plunged down. One huge drop in one stock may generate chain reaction. If this stock is listed in the indexes (S&P 500, DJI, Nasdaq 100, etc) then this stock’s decline drags the indexes down, then other stocks starts to follow the indexes and then new stop-losses are hit and more sell orders are placed on the market and then all repeats again and again and it accelerates into the crash.
Please keep in mind that all above only an assumption of possible scenario of May 14th events.
About the Author
Learn and start using technical analysis, options Trading systems, charts and quotes for DJI, Nasdaq 100, S&P 500 and other indexes for ETF, stocks and options trading.
i need help with some stock questions?
The time period is form December 2008 to 2009
1)what happened in the stock market in general over the trading period (ie. did the market (ie. the Dow Jones, the NASDAQ, S&P 500) go up overall or down overall and why?
2)What has happened to employment, prices and economic growth?
3)What has happened to Real Gross Domestic Product (GDP) and its major components (C,I,G, and X-M)?
1) you can go to yahoo finance home page and click on your choice; then on the left you can click on historical prices or onto a chart that you click on the time amount of the chart(i.e. 1 week, 1 month,3 mos. 2years etc.) 2)From the time period you requested the economy has suffered extremely , major layoffs, falling prices on gas, homes,commodities etc. thus the gdp has declined ; the govt has stepped in so this does not get worse but opinions vary on how far they should go; or if they should even get involved at all and let a free market decide our eventual fate. 3) Again the gdp has declined and i am sorry but i am not familiar with your other symbols.
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