Why did the market crack just before the close?
Answers
2082 points
alanj answered one year ago …
1) The market doesn't go up or down in a straight line.
2) Someone or a group of someones where willing to keep paying a higher price than the previous price. Which in turn kept pushing the price higher. The opposite is also true. Someone or a group of someones are willing to sell for a lower price than the previous price. Which in turn pushes the price lower.
113 points
zinfool answered one year ago …
Markets that crack (break down violently in the last 30 minute) are the result of Hedge Fund and
Mutual Fund redemptions, margin calls, plain panic. The reason it occurs in the last 30 minutes is
that, 1. the sellers have to sell that to cover calls and redemptions that day, 2. the sellers will usually
ask using a limit sale (they set a price, and the market (buyers) either buy or don't. 3. if the stocks
that are needed to be sold are not sold by 3-3:30 (30 minutes to 1 hour before close), the sellers go
to "at market" sell with large volumes to sell and few buyers. Supply and demand forces price sharply
lower to clear the volume needed to be sold. 25% of the Hedge Funds quit business in September,
and 25% more will plain fail. All their holdings have to be sold. Redemption's for July $43 billion, same
for August, September, but October $117 billion, and November even more (the numbers are not in),
it was expected that redemptions would end December 1st, but that has not happened. When VIX
drops below 40, the sales will be done. That explains end of day, October's cliff drop, and where we
stand today. Good luck
411 points
jester112358 answered one year ago …
As usual if there are more sellers than buyers the markets go down. More buyers than sellers they go up. Alternatively, more pessimists than optimists-down, more fear than greed, also down. Its never more complicated than that, and for that reason not predictible, just the like future in general.
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731 points
thinker70 answered one year ago …
FORCED SELLING, there is a lot of deleveraging going on as the economy implodes and it does not spare the big boys, in fact the bigger they are the harder they fall because they generally employ more leverage that the individual investor.
Mutual fund managers MUST SELL whatever they can tom rise cash to meet redemptions, hedge funds to meet margin calls, when they can't get their limit price they are forced to take whatever the market is willing to pay which provides great buying opportunities for those who have the available cash!
