well Obama could use a distraction right now
A “Flash Crash” and a market sell-off are two different things.
The flash crash occurred mainly because of structural or mechanical reasons. While the initial blame was placed on a “Fat Finger” error, it exposed a fundamental problem with electronic trading.
I studied the “Time and Sales” of a few stocks that got caught up in the flash crash. One stock, ACN dropped from ~$42.00 to $0.01 in a few minutes. There were simply no buyers of any real size as automated sellers hit every bid. What was most striking about the decline was as it traded down, the lowest offer/ask price was still in the $30.00 range.
The exchanges have implemented new rules that will attempt to eliminate another flash crash. However, I don’t believe these new rules have been put to the test beyond the one-off stock decline.
The “flash crash” was not a function of levels being broken. There ARE signs of strange liquidity issues in the market, which *might* produce a FC situation.
You can see giant NYSE stocks moving 5-8 cents in a single tick. That concerns me.