CHESSNOID

I actually forgot these existed till I heard them talk about it on TV.  According to Forbes:

If the Dow Jones industrial average falls 1,100 points – equivalent to about 10 percent at the beginning of the quarter – before 2 p.m., the market will shut down for an hour. If the threshold is breached between 2 p.m. and 2:30 p.m., the halt will last 30 minutes. Trading will continue to take place if stocks plummet 1,100 points after 2:30 p.m.

If the index falls 2,200 points – which at the beginning of this quarter was about 20 percent – before 1 p.m., the market will close for two hours. If the decline takes place between 1 p.m. and 2 p.m., there will be a one-hour pause. The market will close for the day if stocks sink 2,200 points after 2 p.m.

In the event of a 3,350-point decline, the market would close for the day, regardless of the time.

The thresholds are computed at the beginning of each quarter to establish a specific point value for the quarter. The 1,100-point drop represents a 10 percent decline; the 2,200 level, a 20 percent drop, and the 3,350 level is a 30 percent drop.

They seem to work to me. When that panic selling starts building momentum, it is hard to stop. When investors take a deep breath during these timeouts, perspectives change and some selling decisions are changed to a hold. Also, if the market trading is halted no one can buy or sell.

I think without the circuit breakers in place today, we would have plunged over a 1,000 points in the DOW. Of course, that is only a guess, but considering we were close to being down 550 points before the market open that didn’t sound too far away.

We are in the first month of the 4th quarter and have already reached that 1st stop. That makes me think that these next levels of support will actually be tested. When we have average movements of 500 point spans in a day, 2 bad days put together will trigger the next stop fast. I even think there is a bad psychological effect when it is triggered a 2nd or 3rd time in the same quarter because people will know they are losing money on paper.

At this point, many Americans are sharing the same financial anxiety. If you aren’t losing your home to foreclosure, then you are watching your biggest asset drop 40-50% in less than a year. If you have stocks or mutual funds in a broker’s account, IRA or 401k, then you are hearing and/or watching these daily crazy stock market corrections eroding your life savings. Even though gas prices are now falling, the price of food and your utilities have gone dramatically up in the last year and are not yet coming back down.