Stock Market Crashes on Open, Circuit Breakers Trip

[MJ DeMarco]

Market opened down 7% ... a complete shit show, and trading continues to be halted as circuit breakers trip.

Marketwatch.com (financial news) also keeps going down.


Here are the price levels:

Based on the market regulations, the following circuit breaker rules will apply for today if met: Based on SPX prices: Level 1 - (7% decline) 15 minute trading halt Level 2 - (13% decline) 15 minute trading halt Level 3 - (20% decline) Trading suspended for the day.

More info:

The market triggered a 'circuit breaker' that kept stocks from falling through the floor. Here's what you need to know

With stocks looking set to open sharply lower, investors will be watching for more market circuit breakers that can halt trading.

www.cnbc.com

These circuit breakers have never been triggered in their current form during regular trading hours. The prior circuit breaker system was revamped after it failed to prevent the May 2010 flash crash. The current set of breakers were put into effect in February 2013.

Of note, if the SPY hits -600, trading for the day is closed -- I don't remember that ever happening in history, perhaps back in the depression crash.

Folks, this could be THE BIG ONE, one that would be remembered for decades.

 

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[MJ DeMarco]

Robinhood, the trading app of millennials and Gen-Zers also keeps crashing.

Second time in so many months. Proof that anything FREE tends to have a hidden cost.

 

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[Process]

Market opened down 7% ... a complete shit show, and trading continues to be halted as circuit breakers trip.

Marketwatch.com (financial news) also keeps going down.


Here are the price levels:

Based on the market regulations, the following circuit breaker rules will apply for today if met: Based on SPX prices: Level 1 - (7% decline) 15 minute trading halt Level 2 - (13% decline) 15 minute trading halt Level 3 - (20% decline) Trading suspended for the day.

More info:

The market triggered a 'circuit breaker' that kept stocks from falling through the floor. Here's what you need to know

With stocks looking set to open sharply lower, investors will be watching for more market circuit breakers that can halt trading.

www.cnbc.com

Of note, if the SPY hits -600, trading for the day is closed -- I don't remember that ever happening in history, perhaps back in the depression crash.

Folks, this could be THE BIG ONE, one that would be remembered for decades.

Heard a guy say, “Oh the markets going to hell. Guess no one can retire.”

Guess people should have read the millionaire Fastlane .

Such slowlaner mindset.

I’ve sat out of the market 3 years because I thought it was overpriced in Aug 2015.

Even when I was a teenager who loosely followed stocks in 2006 I thought things were overpriced.

Seems I’m a few years ahead of the herd in realizing. I have never been right about the exact thing that causes a crash.

Just like Nassim Talib’s Black Swan concept states.

 

[socaldude]

Can you imagine trying to retire by going all in on these indexes. Two months ago at an all time high your planning your vacation on the beach and two months later it’s all gone and then some. Wow.

 

[ljean]

Even gold has been plummeting. I expected this one to be the store of value for when people sell their stocks.
Where is all the money going?

Cash to pay margin calls...

 

[LightningHelix]

Markets are already back to early 2017 levels. FIRE folks retirements are getting pushed back by years in just a matter of days...

I feel sorry for the slowlaners...

Hopefully those on the forums can take it as further proof of the risk in the slowlane strategy.

You are at the complete mercy of any random occurance, such as a virus. In the span of 35-40 years of saving its not a question of IF, but a question of WHEN.

 

[MJ DeMarco]

PSA: The market is up. The last time Trump spoke, the markets took a swift decline. If he announces a CV positive (conference starts in a few hours), it could send the markets plummeting off this rebound. Consider the market is on a small rebound today, it could be an opportunity to buy some puts. I normally would NEVER recommend buying puts at a VIX 72, but that volatility isn't going to go away for a few weeks. Hold time would be a few hours, to a few days.

 

[MJ DeMarco]

Looks like tomorrow might be PART 2 of the crash. Futures down big again with the European travel ban. Could have an open in the 250's (SPY).

If it keeps going down, I will just recoup my money with selling calls since volatility is so high.

Selling calls in a blood bath is like bandaging a gun shot wound, sure the bleeding slows, but the dying just takes longer. It helps minimize losses, but it is not necessarily a sure thing. Your post seems confident in the strategy, hope it works out.

 

[JohnBuffet]

Is anyone using this as an opportunity to buy? I was thinking to finally buy into an index but I don't think we're at the bottom yet. I know that no one knows when that could be, but with Corona it looks like things are going to keep getting worse for a while.

Things might be at discounted price but I fear buying today will just result in further loss. I mean everything is getting shut down, even the NBA! I figure it's best to wait it out for a while..

 

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[MJ DeMarco]

The VIX is at 77, nearing an all-time high ... which was 89 back in the 2008 market crash.

 

[MJ DeMarco]

I posted this in the other thread, but this might be a better place...

The market (thus far, it is still ongoing) loved the press conference. I'm guessing it was the coordination with public/private interests. I was pretty impressed, but I am just one opinion. Money poured into the market, and the market represents millions of minds and trillions of dollars.

Also of note is volatility which to me, is the bigger indicator. The last market "rebound" had very little reversion which indicates the rebound wasn't trusted. This one had some power to it because the VIX backtracked 20%+. Still, at 50+, it doesn't portend the end of this, just maybe that the low has been locked in.

News reports have stated it is the end of the bull market. I am, however, still trading with a bullish (long) outlook. The big question traders/investors always ask is, "Is it priced in?" Does the market already reflect all the closings, the cancellations, the lower consumer spending, and the lower earnings reports ... a big question to ponder for anyone investing.

 

[Here]

This is crazy.

Last month I pulled several thousand dollars out of mutual funds. I'm planning to use the money in a few months and I figured the market would dip soon, wanted to be safe.

The market kept going up instead, husband would make jokes about how I should have waited a few more days ...

 

[million$$$smile]

I think the news of crude dropping along with the growing fear of the threat of CV worldwide really set the stage for the plunge this morning. I watched it open, and it almost seemed as though everyone just knew the circuit breakers were going to trip, and within just a few short minutes it happened.

The huge concern regarding CV was the driving force, but oil prices plummeting overnight was the straw that finally set it in motion.

I for one don't believe this is anywhere near the bottom yet, and tomorrow (Tue.) my guess is it will gap up in the a.m. and open at 3100 or so. I think there is a bit of wind in them sails yet, but won't last the day and close out again lower, but not much.
Have done quite well the past few weeks but this drop today was a punch in the gut. OPEC wasn't even considered in the equation 48 hours ago, at least for me. Hope to pull off a hail mary in the a.m. with a few stranglers.
Then all cash on the sidelines for fire sales...

 

[BD64]

Markets are already back to early 2017 levels. FIRE folks retirements are getting pushed back by years in just a matter of days...

 

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[amp0193]

Retirement (or the lack of) is the elephant in the room.

Big motivation for me to achieve my financial goals.

My parents were set to retire next year.

They should have retired 5 years ago.

I don't want them to work anymore.

 

[Rivoli]

Is this officially the end of the Bull Market?

 

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[Vigilante]

One school of thought is the “when in doubt, get out” mentality.

The second is that their are a high number of margin calls going on this week so other assets are being sold to raise cash to cover those.

It’s amazing what’s happening because the margin calls are wreaking havoc on the stock prices. OTC stocks are dollar for dollar meaning they’re not marginable but they are used as collateral for margin accounts. Market managers in OTC stocks are backing off of the bid prices, watching margin calls happen, and scooping up buckets of OTC stocks that are being sold to cover at 10% of the regular trading price. The holder of the margin account that busts is powerless as non margin holdings are sold way below market price to collateralize margin calls. Everything is liquidated.

This is the second day in a row of this which makes sense because typically a margin call has three days to cover. The bloodbath started yesterday on the third day of the trading week.

 

[Tossek]

I feel sorry for the slowlaners...

Hopefully those on the forums can take it as further proof of the risk in the slowlane strategy.

You are at the complete mercy of any random occurance, such as a virus. In the span of 35-40 years of saving its not a question of IF, but a question of WHEN.

I disagree here a bit - such random occasions(floods, hurricanes, disruptive technology et cetera) can hit any business. Any industry. As I can shift from air lines to bonds, I will have to adapt to my customers. I will have better and worse time. But the feeling of control and redundancy is or can be made higher, yes.

E.g.:

I hope you don't have an fba business when amazon shuts down...

 

[Deleted78083]

Everyone knew the market was overpriced for far too long, yet the different mechanisms installed after 2008 made a bubble explosion difficult (read articles published in 2019 on the "possible" upcoming 2020 recession, it is quite interesting). What we see here is a slow "explosion" of the market triggered by the coronavirus epidemic. Tbh, it could have been triggered by anything else, but well, it is like that.
Now, why was the market overpriced? Money has been cheap for a long time now, this money was invested into the market which saw itself having "too much money" and inflated and inflated stock prices. As long as companies were profitable, why stopping? Then the virus appeared in China, markets panicked to see companies profits falling because of the disappearance of Chinese consumers and suddenly, everyone remembered that in fact, the stocks were overpriced anyway. We now know that what happened in China will also happen in th rest of the world, which means an even bigger blow for companies. Imagine: after not being able to sell because China couldn't deliver, your own clients are placed in quarantine!! So overpriced stock market + impossibility to get supply + impossibility to sell merchandise + future recession = a financial balloon slowly deflating to come back to "actual" prices. Although as we speak, many companies are undervalued, the time to buy is between now and the next three months!!

It is interesting because quite unique: in the 1929 or 2008 crash, the economy was down because people did not have money to buy. In our case, people have the money....but cannot physically go buy!! So more money is only going to partially solve the problem, what we need is to get people out of the house and into the shops!!

I am pretty sure we'll remember this day for a long time, it is historic. Sad...but historic!

 

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[socaldude]

Officially called black monday with a wiki article now .

Black Monday (2020) - Wikipedia

 

[Champion]

It just sucks when you saw it all coming but didnt have enough time to prepare for it! Time to buyyyyy

 

[MJ DeMarco]

Futures are up a few % on the Trump's mention of payroll tax relief.



MY guess is that strength won't last until morning. I think the bottom (as I mentioned last week) is around SPX 2500.

 

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[Zhyna]

7% dip right on market open. Utter chaos. That coupled with the BTC drop at around 30% just 4 hours prior. Never seen anything like this. Can't see a bottom anytime soon.....

 

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[NovaAria]

Even gold has been plummeting. I expected this one to be the store of value for when people sell their stocks.
Where is all the money going?

 

[Vigilante]

I saw that. Gold, silver and crypto are all just crashing like crazy. I figured they at least would somewhat hold their value? Especially the metals.

Silver seems to be holding and higher than last year same time

 

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[MTEE1985]

I saw that. Gold, silver and crypto are all just crashing like crazy. I figured they at least would somewhat hold their value? Especially the metals.

One school of thought is the “when in doubt, get out” mentality.

The second is that their are a high number of margin calls going on this week so other assets are being sold to raise cash to cover those.

 

[BellaPippin]

https://www.marketwatch.com/story/i...ce-for-delivering-C0VlD-19-vaccine-2020-03-12

 

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[Ahmet1054]

Hi everyone. I think you guys investing on the U.S stock market should wait a few weeks still because:
- the shit storm will strike even harder in the U.S when a strong quarantine will be imposed in every state, just like what we see in Western countries ATM
---> the unemployment rate is a good indicator: 3% ATM, it will raise up to 20% IMHO
- the real crisis won't come form C0VlD-19: a vaccine will be developed within a few months, the pandemic will be healed. The real depression will come when the FED decides to raise the short-term interest rate. Then, the $ goes up, emerging countries' currencies get weaker // $, a lot of businesses go bankrupt and a credit crisis follows because the debt market is ducking huge right now, bigger than the housing bubble of 2008. The true crisis will be a credit crisis.

So 2 things to watch really:
- the unemployment rate: wait until it gets up to 20%
- the interest rate on the $: a raise will trigger a credit crisis

 

[Mbc]

Is anyone else trading options in this crazy market?

I've been going long on some calendar/diagonal spreads (both calls and puts), and selling credit spreads and some naked options trying to take advantage of high IV.
I'm rather bearish in the medium term (although just closed out some SPY calendar put spreads today because I felt IV would be against me).
I think it will be a slow decline though, so no more IV spiking. VIX is still in backwardization until Sep so still Bearish outlook. It starts to flatten after that, so maybe market is thinking that's when things pick back up for now?

At this point I don't feel confident owning anything that is Vega positive tho, so probably still going with credit spreads in the short term.
And maybe looking at long term calendar spreads (1yr out long Call) since Calls are pretty cheap even with current IV. Like a Jan 21' 280C is about 60% underpriced right now, IV could halve and it would still not be ovepriced. I would then be selling shorter term Calls against it (poor man's covered call).

If I had larger capital I'd be selling Puts, like MJ suggested in another thread.

Is there still an active Options thread on the forum? Maybe in the INSIDERS?

 

[MJ DeMarco]

Is there still an active Options thread on the forum? Maybe in the INSIDERS?

There are several on the INSIDE, although I wouldn't call them "active" -- they get a few posts per week. Lots of folks do trade options (I do regularily) and when I find something interesting, I post in there.

My active options trading account is up for the year. (My paycheck pot, obviously, is down).