Market Losses: Intra-Day Breakdown

Another trading day, another collapse in the final hour. The Dow's cumulative loss of 550 points over the past two days has occurred during the last hour of both days.

This is insane. These last hour swoons (and gains) have been quite common in this vicious two-month sell-off. So that got me thinking - what have been the intra-day returns?

I broke the day into four time segments - the overnight return (the difference between the market close and the market open), the first hour of trading, the day between the first and last hours of trading, and the last hour of trading.

click to enlarge

The worst losses have not been in the last hour of the day. In fact, the first hour and overnight have both sustained heavier losses. 

Since September 1, the cumulative loss for the S&P 500 during the first hour of trading has been 17.4% and the overnight return has been -12.7% while the last hour has sustained losses of 11.0%. 

Most of the damage has occurred since October 1. Since the beginning of the last month, the markets have declined cumulatively 15.3% in the first hour, 11.0% overnight and 8.8% in the final hour.

During the middle of the day, markets have actually risen.  Since September 1, the cumulative gain in the S&P 500 has been 3.3% from 10:30am to 3:00pm.  Oddly, during the teeth of the decline since October 1, stocks are up 6.6% mid-day.

Comments

[carey_jim:]

It looks as if the market has transformed itself into a casino and that an army of day traders are bouncing back and forth like ping pong balls between short and long ETFs and other financial instruments. You never know who is winning this furious game until the end of the day.

It's been proven over and over again that it is impossible to time financial markets but the show must go on.

Las Vegas has even worse odds but at least it provides call girls and other entertainment for the losers who can still afford them and its markets are "regulated" --- by the Mafia. (Not really. The Mafia has been pushed out by the big owners who have more power than the Mafia ever dreamed of and that the SEC ever hoped for.)

Buying stocks is supposed to be about owning part of a good company that either pays dividends or reinvests them for more growth which gets reflected in the future price of its stock, not about day trading or even "month trading."

Since 1% of Americans own 60% of all stocks, and the next 5% own most of the rest, it isn't of much concern to the average citizen who doesn't even own his own SUV not to mention his house.

Speculators perform a useful role in that they are willing to take huge loses if they are given the hope that they might make huge gains too. Like everyone else however, they tend to whine they are losing and strut when they are winning.

It's human nature.

2008 Nov 18 01:05 PM