 Monday, May 6, 2002
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In this second of a two part essay, Contributing Editor Daan Jourbert continues his tongue in cheek look at the stock market which began on Saturday.
Name of module: Pricking bubbles slowly 102
Course requirements: Growing Bubbles 101 & 102 Market Psychology 102 12 months experience as a day trader
Reference materials: These course notes Speeches of Federal Reserve Board Chairmen Extensive NYSE market data (5 or 10 minute intervals)
Description: This is an extra-curricular module that is recommended to all students who intend to follow a career in Government with the intention of reaching the top of the pyramid, or who aspire to sit on the Federal Reserve Board or to become staff members to the House or Senate
Strategies available to a Crash Prevention Team (CPT)
Lecture 2
Daan Joubert
Introduction: Of levers and leverage
In the first lecture we discussed the danger bursting bubbles hold for all Authorities in power. Politicians in particular get highly upset when they find themselves with the fall-out of a Market Crash, which is how Bubbles end, in the form of a Depression. We saw that both parties - the one in power and the other who gets in because of the Depression - have their noses out of joint. Which means that those people who were mandated to Stop the Crash at All Costs, but failed to do so, will have to wait many, many years before they have another chance of an Appointment. If ever.
It is therefore very strongly desired by all Parties in the political spectrum - as well as the mandated overseers of the economy and financial system - to avoid playing the game of musical Administrations. Which means, Stop the Crash.
For the man in the street the effects of a Market Crash are typically quite severe; in fact, much more severe than moving from the central seat of government to where politicians go when they are aspiring rather than administering. Consumers have to change their life-styles, often quite drastically; Politicians merely change addresses.
One problem in trying to hold the Bubble aloft is that the weight of funds in the market in a mature Bubble is enormous. Like any real weight, the funds have inertia - when a trend has set in, it takes a lot of brute force to bring it a halt and perhaps even reverse it. It so happens that such a force is absent the market. Even if one found the required resources somewhere to halt a threatening descent into the abyss, their employment would have to be so blatant that it attracts attention and triggers some awkward questions.
This will not be a Good Thing. Questions are to be avoided at all costs; people may get to enjoy the habit and begin to ask questions about all kinds of things, such as why is the money supply growing so rapidly. No, preventing a Crash has to be done surreptitiously; with delicate finesse, not brute force.
Oh, and isn’t the solution classical! It comes all the way from that old “Eureka” character - the teacher who made a habit of sitting in baths thinking of questions. Archimedes, the old Greek philosopher, is also famous for saying, “Give me a lever long enough and a fulcrum on which to rest it, and I will move the Earth.” Now that is what one wants to hear if faced by the task of stopping a Wall Street in motion in the wrong direction.
The question of course is which lever to use and how to adjust the fulcrum to best effect - a task that should not be impossible as even Wall Street doesn’t measure up to the weight of the Earth.
Two strategies for stopping a sell-off
Two possible strategies exist to prevent a really bad sell-off on Wall Street when it is known the risk for this to happen exists. The first is to pre-empt the market action on the NYSE. Use the futures market to establish a positive outlook among investors and make sure that the Dow Jones, SP500 and the Nasdaq kicks off in an upward direction at the open. Then rely on the sheeple and the day traders (almost synonymous) to take it further.
The second is to wait and then correct the incipient sell-off as the market ends its initial fall and, as happens inevitably, then hesitates as if to seek direction.
With a bit of luck and good timing it is a simple matter to ensure that the direction is up.
The first strategy has the limitation that if it does not deliver success, the CPT sooner or later will have to resort to brute force. Then the fulcrum will be located in the middle of the lever and the CPT will need really deep pockets to balance the weight of selling.
The second strategy is more delicate and has greater finesse - almost like one of the more esoteric Asian martial arts where one waits for the opponent to come a little off-balance and then strikes quickly and decisively, but with little display of real force..
During any trading day there are moments when some small event - a new bid price, or perhaps an offer, on a key stock - can set the market off in a new direction. On bad selling days it would require a more robust signal, but if timed properly this nudge could still be much smaller than the overall effect on the market.
The more so if the nudge can be disguised as normal market action, which the brute force method may not. And the second strategy has certain other advantages too.
Psychological advantages of the second strategy
American sheeple (i.e. consumers who also trade actively in equities) have been strongly conditioned over the past 5-6 years or so to believe that a stock market can only move in one direction, over a sufficiently long time span, of course. [The term ‘long’ is relative, of course, as always. For some it could be years; for others months and not too long ago many believed it was a week.]
With corrections against the long-term rising trend always temporary and seldom longer than a week (or a day), a population of ‘bottom fishers’ has been cultivated. Also known as ‘dipsters’ - people who ‘buy the dip’ - these are traders who enter a market vigorously after there has been a temporary decline. During the long lasting Bull Market there has been many occasions to make substantial profits within a very short span of time and it is not unlikely that for the majority of bottom fishers their action has become a conditioned reflex - like Pavlov’s dogs salivating at the sound of a bell, these people look with great eagerness on a plummeting Dow Jones, just waiting for the right moment to pounce.
Because of this conditioning, the reaction of the market to Bad News is generally quite limited. The reason can be found in the way sellers react when the Dow Jones has fallen more than say 100 points. (For more detail refer to Market Psychology 102 under Herd Behaviour and also the reading assignment on Nobel Laureate Ivan Pavlov).
Because sellers too have learnt the lesson that corrections are temporary and that steep intra-day falls are generally followed by equally steep recoveries, the supply of stock into the market soon starts to dry up as the market falls steeply.
If the news was Bad enough, the Dow could slip to more than 200 points in the red, but at that point sellers will become very nervous. Just the slightest sign that speculators are ‘buying the dip’ and most active sellers will disappear off the trading screens with almost the speed of the internet, to sit back and wait for the much better prices they know will be obtained later the day. If they are still going to sell now that the bull market has resumed.
Trying to support the market on an anticipated weak day through brute force is like St George taking on the dragon without sword and an asbestos suit - the odds are stacked heavily against it. At the opening bell sellers swarm all over the market, all trying to get out with as small a loss on the previous close as possible. With market sentiment so very negative it will require oodles of boodle to halt the rot.
Two kinds of intervention
Prior to the 1987 Market Panic - almost a Market Crash, but the latter was prevented by a sudden and massive increase in liquidity, which at that time worked well, as it did again in 1998, because consumers were not nearly as over-borrowed as they are now - stock market futures played a relatively small part in all equity markets.
Until that time any intervention - if it had been contemplated - would have been through equities, such as the heavyweights in the widely observed Dow Jones index. That Crash let to the establishment of the Crash Prevention Team (CPT) and some may think that the coincidental development since then of a futures market was allowed and encouraged simply so the CPT would have a handle with which they could manipulate the market.
[If any of the current intake of students into Bubble Theory later reach the post-graduate level, an investigation of this allegation could consider this subject for their thesis.]
Over the years since then the situation has changed dramatically. All over the world the open positions in the futures and other derivatives and the daily turnover in the nominal value on futures and options markets by far exceed the action in the equity market itself.
While perhaps not strictly what Archimedes meant by a long enough lever and suitable fulcrum, the derivatives markets do make available a force that might be massive enough to counter any incipient inclination by the equity markets to descend rapidly back into the depths from where they had risen so steeply during the past few years of the Bubble, i.e., to bring the “C”-word into play, to Crash.
The objective of a CPT is not to push equity markets to new highs, but merely to prevent the kind of sell-off that could trigger a real and lasting Panic, on those days when some very Bad News have become known or are expected to hit the wires during the day.
[PE’s of most leading stocks are already in the stratosphere and any significant increase in the major indices would only make a Crash more likely later and also make its effects even more ruinous on the sheeple who have borrowed heavily in order to increase their positions. So, unless there is some leeway to make up, the Real Authorities do not want the Bubble to run on indefinitely, despite the earnest wishes of the populace. And the Politicians, of course.]
Futures on the major New York market indices offer the advantage that they trade 24 hours per day on the Globex market, which means that manipulation of the futures could take place before trading opened in New York. For example if the popular S&P500 futures could be maneuvered to show a substantial premium when US equity markets open, it might just ignite the required feeling of optimism among investors and thereby trigger enough of a buying spree from the opening bell to prevent a real bad sell-off.
The alternative to futures, of course, remain the heavyweights in the Dow Jones.
Assignment 1 - Mid term
A four part answer: analyse the two different strategies, each using S&P futures or the stocks in the Dow Jones as the means to end a sell-off.
Consider in detail the effect of the actions on the psychology of market participants as well as the relative amount of funds needed for the four alternatives. Draw conclusions from your results.
Compare your findings with what is presented follows later in this module
Financial advantages of the second strategy
Applying the first strategy on anticipated weak days only when Wall Street opens, is leaving it too late; by then negative sentiment has set in and it will take much buying to have an effect. One solution to this problem is to purchase enough S&P futures before the NYSE opens to effect a significant premium over fair value and to keep the premium high once the market falls on the open. Except under rather rare conditions, this is likely to demand a relatively large amount of funds as margin, but the real outlay is small.
A bonus of doing so is that a falling Dow and strong futures market just at the opening of trading present opportunities for arbitrage. Arbitrageurs will sell ‘expensive’ futures and purchase ‘cheap’ baskets of S&P500 stocks, locking in the differential above fair value to be realised later at a suitable time, when prices of S&P futures prices and the S&P500 index have returned to a fair pricing relationship.
Their actions will bring in some desired support for equities, but their sustained selling of S&P futures could test the resolve of the Crash Prevention Team (CPT) - as well as the depth of its pockets. If the intervention should fail, and the market falls steeply and stay down, the amount of the loss that has be made good can be substantial, even for a very well funded ‘official’ organisation with excellent connections to the two main wardens of the Government’s cash.
According to the second strategy, the CPT only enters the market in support of the futures when the market has already plunged quite steeply after the open. In that case, the risk of large losses is mimimised if intervention by the CPT happens to be unsuccessful in its objective, i.e. reversing the weaker trend of earlier in the day. If the timing was good enough to enter the market near the bottom, the loses would be minimised and could even deliver a small profit to be used another day.
If the intervention brings the ‘dipsters’ in en masse so that the action happens to be very successful and the market rebounds steeply in pursuit of the futures, the earlier purchases of S&P futures contracts can be carefully off-loaded into the new strong demand that has developed, and so result in more than just a jolly good profit for the CPT.
This highlights one of the main advantages of the second strategy - i.e. that of selecting the ‘nudge at the right time’ over brute force - by delaying intervention until it is judged that the right conditions have developed and then to effect a reversal in the trend - with the active and very much appreciated assistance of the ‘dipsters’ of course.
When the CPT uses the second strategy successfully, the intervention actually becomes self-funding. This means that with the second strategy the CPT can afford to be much more aggressive in their intervention, since success will firstly safeguard and secondly augment the amount of funds available to them for intervening in the market.
Using equities
It can be anticipated that if evidence of such ‘official’ intervention is found, the future results achieved by such intervention are likely to be unexciting. If the ‘brute force’ first strategy was used at all, any lasting success at all is quite doubtful. If futures are used for the intervention, the increased speculative selling of futures into the CPT could result in a distribution of funds from the official sector into the private sector could dwarf even the welfare programs. Except that in this case the recipients would not be those on welfare.
The alternative, that of using equities, could also create a problem if the active presence of the CPT became known. When concerned investors realise that the CPT is acting as the ‘purchaser of last resort’, it could turn out that the CPT becomes the majority share holder in a majority of the large corporations. It would then be asked to appoint directors to The Board and before anyone realises what is happening the old Communists in what remains of Russia will be claiming that they have won the ideological war.
[We digress, but students interested in this subject may find a new module in our Political History very interesting. It is “The Power Play in Modern Politics” and the students refer to it as “Machiavelli is alive and well and having a ball in the 21st century.”]
So, even if the brute force method is tried, it would soon be replaced by the second, more delicate strategy, where the timing of the action and the effectiveness of the available funds are improved. And, most importantly, where the intervention is not so blatant.
Which means the main choice really is not between strategies, but between the use of S&P futures and of the Dow stocks.
To answer this question one has to consider just one factor: how to get ‘more bang for the buck’. Anything else is superfluous. Getting more bang for the buck means that the risk of attracting undue and very much unwanted attention is reduced.
[Of course, should the market ever reach a state that the CPT considers perilously close to a disaster - despite all their best surreptitious efforts to stop the rot - they might decide to come out of the closet, so to speak. To let people carefully know in graded stages that Uncle is there with a ready hand and a thick wallet to make sure nobody who plays the markets will get hurt. That is, until it becomes necessary for a full frontal admission that there remains not even a vestige of what once were considered a free market.]
This means that one has to look for which of the S&P futures and the Dow Jones has the largest share of public awareness. It has all to do with PR work and exposure.
And the question of hen and egg, which answers the question of which hen. Or egg.
Assuming that the second strategy of a nudge at the right time is employed, consider two scenarios. In the first intervention takes place through the S&P futures. A ‘buyer with an agenda’ steps in and takes out a good number of the bids, sufficient to have a marked effect on the ruling bid and offer prices. Now the buyer waits for the reaction - fresh and very much speculative purchases of the S&P futures in reaction to what happened, spilling over into the ‘real’ market of S&P stocks as computer based arbitrage takes place and then spiraling through into the Dow Jones where the move appears on the most widely watched index of all to attract popular attention and thereby triggers day traders and ‘dipsters’ into their usual highly frenetic action.
In the other scenario, the interventionist buying takes place among the 30 Dow stocks. The Dow reverses its downtrend and suddenly sparks higher. This move attracts attention over a wide front, stretching from the day traders and the ‘dipsters’ to the professionals who rapidly react by taking out the bids on the S&P futures, thus reinforcing the whole move across a wide and near simultaneous front.
The S&P futures and the Dow Jones share the characteristic that they are both very easy to change in a quite dramatic manner in a short time, so that the final decision between the two rests on which is the more widely watched and followed.
While many pure equity funds may not care too much about what happens on the futures market, a good proportion of individual investors and traders - particularly of the day variety - might even be oblivious of the existence of derivatives, at least to the extent of following what happens from minute to minute. The effect changes in futures prices has on these market players might be delayed, at best, or very little at all. They will only be influenced by the roll-on effect on the Dow Jones, which is their primary barometer of market health.
Such indifference from a segment of the market make futures a less effective lever with which to engineer the market.
A more effective solution can be found if academic rigour is applied to what is known of the behaviour and perceptions of market players. It is known that different factors have different effects on the various types of people who are active in the markets. Long term investors, for example, pay much more attention to interest rates than day traders - at one stage recently a vanishing breed - who believe that nothing Greenspan does or say can have any effect on a position that is held for only 27 minutes. If, of course, they are aware of Greenspan’s existence at all.
Investors would also be more aware of what the PE ratios of their purchases are. We know from recent history that for day-traders the concept of a PE is completely foreign. In the past most of their purchases lacked the earnings needed to calculate a PE and a good number even lacked any sales whatsoever. What they consider important is what the price has done over the past 60 minutes, or the probability that the posting of a suitable message on a chat forum would raise the price 7.5% or better over the next 20 minutes - a practice that is apparently not yet over and done.
So the question becomes, “What can really move the market best?” Careful reading of the material presented in Market Psychology 102 will reveal that the single most important driver of market sentiment on a global scale is a factor derived from the NYSE - the Dow Jones Industrial Index.
It does not matter that most objective observers will find it quite ridiculous that investor behaviour and market trends can be dictated to by an index of only 30 stocks, even if these are among the corporate giants of the global scene. The Dow exerts an influence out of all proportion to even the market capitalisation of the 30 stocks used in that index. And it does so universally, for all practical purposes.
This fact is a godsend for a CPT. It means that if the Dow Jones Industrial Index can be steered into a desired direction, changing direction of the S&P500 and Nasdaq becomes a matter of routine, just like turning a steering wheel to go around a corner or, even better, to make a complete U-turn.
The hen (or egg) that starts it all is therefore selected stocks from the Dow 30; what then happens to the rest of the market - i.e. the rest of the Dow 30, the SP500 and the futures - follows naturally like a whole brood of chicks. The method is discussed below.
Methodology for using the Dow Jones Industrial Index
The timing of the intervention is critical in the light of what is known of the situation. If sentiment is negative, but not outrageously so, the intervention can begin right from the open - almost as the brute force method, but implemented with circumspection. If the outlook for Wall Street is very bearish, it is wiser to wait for the first shake-out and sell-off to complete before the intervention is commenced.
In both cases the method of doing so is the same, as will be explained shortly.
If the market is hesitantly negative at the opening, a firm start to the Dow Jones can attract more buying until the whole market turns positive.
However, if there is a major sell-off right from the word go, it is better not to attempt to stop the rout too soon. That is too much the brute force way, which Archimedes would not condone. Rather wait until the market starts to hesitate - a situation where sellers are no longer eager to get out at all costs, but while buyers are wondering whether this is not the Big One that they have been scared of for a long time - the moment when sellers pause to take stock and when the bottom fishers are waiting for a sign to climb into the bargains with a vengeance.
At that special moment in time, determined buying on a selective and sustained basis, by continuously taking out the offers on a very few selected stocks among the Dow 30, soon has the Dow Jones-index ticking higher at a constant rate better than 5-10 points/minute. Once this move starts, it won’t be long before the sellers of other Dow stocks react by withdrawing from the market, or raising their offer prices, thereby helping the recovery. And that is when the bottom fishers or ‘dipsters’ pile in. While after a morning sell-off of 540 points, such as was experienced not too long, it is not likely for the Dow to turn positive before the end of the day, in most other cases a close in positive territory is not too difficult to accomplish. (On that occasion the Dow recovered almost 300 points in less than 25 minutes during the lull over lunch time and closed just 170 points down on the day. Not too bad for the CPT, was it?)
Of course, the CPT provided only the proverbial seed from which the tree of recovery would grow. The cannot do this with brute force alone or in the face of sustained and determined selling by investors of all ranks. To achieve success requires first of exquisite timing and secondly the eagerly supplied and whole hearted assistance of the ‘buy the dip’ brigade. When they pile in, the whole market gets into a feeding frenzy and sellers run for cover as fast as they can.
The battle is finally won when both the S&P500 and the Nasdaq indices start to rise in sympathy and then also move into the black. The latter events are known to occur on a few occasions only after the Dow Jones has moved higher from the previous close by more than a 100 points, which is a measure of the success of the Dow Jones to sooner or later sway market opinion even in the face of widespread and intense negative sentiment.
When this happens, Wall Street is on the move again; all the Bad News is forgotten and Goldilocks is laughing her heart out. And so too is the CPT, of course, if one exists.
This methodology can be used time and again, provided that on each occasion the CPT selects those Dow stocks that at that moment in time provide substantive motivation for the sudden and sustained buying interest. The reasons to explain why the market behaved the way it did can be almost any piece of news that has just become known about one or two of the more expensive Dow stocks. In the absence of any real hard news, a suitable item can be passed onto the popular financial media with a nudge and a wink and soon the talking heads will be off on a tangent that should provide an acceptable after the fact explanation for the market action. And none the wiser.
Why this is easy to accomplish
Different from almost every other stock index in the world, the Dow Jones Industrial is not a weighted index - it does not use the market capitalisation of its stocks to determine how much each contributes to the index. The Dow is a straight arithmetical index; equal to the sum of the prices of just 30 stocks. There is however a scaling factor that enables the comparison of the Dow of 100 years ago with that of today. This factor means that one dollar change in the price of any one of the 30 stocks will adjust the Dow Industrial by about $5.00.
At the moment of intervention it is necessary to look at say the top 10 Dow stocks in terms of price - or those trading at over a $100 per share, say - and select 3 or 4 that have the right credentials for the moment, i.e. there is some news about them that can be used to camouflage what will happen. Then, in rapid succession, take out all the offers for say a span of $3-5 above the trading price and Hey Presto! The Dow has just jumped from 50 to 80 points in a few minutes.
If the timing was right, sellers in these stocks are hesitant to come back with lower bids, while some other buyers decide to also take out a few offers. Buyers and sellers in the other Dow stock see what has happened and also react accordingly, at least until there is greater clarity over what is happening.
And before the market really knows what is going on, all the conditioned reflexes have taken over and people begin to smile again because the Bull is back.
This does not remove the fact the prior to the market opening the S&P futures do offer an opportunity to establish a positive spin on the new trading day and undoubtedly it would be wise to exploit the opportunities the futures present. But from the psychological and even a logistical perspective, using selected stocks from the Dow Jones for this purpose makes a good deal of sense.
It is all so easy, really, and it will work time after time. Almost.
Risk inherent in the Dow Jones
The intervention is not without risk - in fact, two kinds of risk.
The effect rapid changes in the trend of the closely watched Dow has on the stock market as a whole is substantial. Any upward reaction in one or two Dow stocks after a steep fall would trigger the conditioned reflex among traders and investors; when they all react, the Dow will be roaring up, up and away - to be followed by the rest of the stock market.
The problem is that such an event - particularly if the recovery is off a steep one-day fall - will have an effect for much longer than a day. If bullish sentiment really takes hold of the market, it can run to heights where the valuations become untenable over the longer term. That makes the market just that little bit more vulnerable to Really Bad News and then it becomes a little more difficult to work the magic, because the fall is off a higher level. The objective of intervention is to keep the market moving mainly sideways; not to trigger a new bout of ‘irrational exuberance ‘ and thus to set it up for a worse catastrophe.
The objective of a CPT and its SLE’s is to engineer a soft landing - one that will offset the negative effects of the so-called wealth effect, but without precipitating a Crash that wipes out much of the accumulated wealth of 40 million plus of American households. While achieving this objective. the last thing a CPT would want to do is send the market off into the wide blue yonder and a new string of all time highs. And then a bigger Crash.
An ideal would be to halt any steep fall and begin a recovery, but to give slack again the moment that market reacted sufficiently to introduce some stability. If the Dow Jones could close lower by 300-400 points per week, so that investors have ample time to adjust their financial positions to the lower value of their investments, a target in the vicinity of say 7500-8500 points could be reached without creating any turmoil in the markets.
The strategy would be to intervene if the Dow fell steeply during morning trade, in order to prevent panic taking hold. Yet, if weakness set in during the afternoon and was not too severe, it could be left alone to run its own course and thereby contribute to the objective of a gradual lowering of the Dow.
Any severe fall late during the day could always be countered the next day, ‘employing’ the media overnight to calm the nerves and create a feeling of low-key optimism again. The other risk of course lies in being found out. Many market players short the stock market, either as individual stocks or as a whole though the index futures, of which half the open interest are short the market. It would be a pretty convoluted court case if these market players should have proof of intervention and take the CPT and its backers to court to claim punitive damages.
Finally there is of course the risk that intervention will fail. This moment can be postponed through the use of ancillary methods, such as keeping interest rates low and ensuring a steady inflow of foreign investments through the ‘strong dollar’ policy.
Some commentators have scoffed at the idea of the Authorities actually being able to influence the forex markets. These markets are seen as too large and too unencumbered to be influenced even by governments, as the British discovered some 10 years ago and launched George Soros into fame. Yet, the scoffers are a small minority. The question of an official “strong dollar” policy, does not elicit widespread and outright laughter as if it is really a joke to claim such a policy.
Consider what would happen if a government announced they have decided on a mild winter policy, or a policy that requires all citizens to remain healthy until the end. Now we know that announcement would be met with roars of laughter; that is until people have the sobering thought what it would be like to be governed by people who make such ridiculous claims at omnipotence. By analogy, the fact that people in general, and central bankers in particular, are not rolling down the aisles when they hear all the talk about a strong dollar policy shows that governments are in fact able to influence forex markets and to do so for an extended period of time.
Students who are interested in this aspect of the markets might consider our module on the new forex market, entitled “Forex and the free market fiction”.
Conclusion
Archimedes would applaud the efforts of a CPT if it used the significant leverage of the 30 stocks on the Dow Jones Industrial index to engineer a truly soft landing from the still extant market Bubble. It would be a major ‘first’ for slow bubble pricking if these efforts are successful and they would feel that they have contributed to the success of the slow and controlled deflation of the largest Bubble of the 20th Century.
This is of course a lecture in market theory and it is up to the students to determine to what extent reality presents evidence that this theory has been turned into practice.
Assignment (End of term)
Examine the available data (5 or 10 minute intervals) from the different markets to search for evidence that the above method of intervention has found application in practice.
If such evidence is presumed to be found, analyse and describe the near and medium effects the intervention had on the market. Extend the analysis to identify any instances of irrational exuberance following intervention. Did such irrational exuberance follow through into a new bull market, or was it a temporary effect of the intervention?
Provide a motivated answer, irrespective whether you could identify examples of actual intervention or not, to the question whether in your view a CPT, or similar agency, can in principle engineer a successful soft landing for Wall Street. Describe which contingencies could arise to raise doubts about the ability to do so.
(Hint: Search out those days when the Dow Jones feel steeply at the open or during morning trade; then examine the nature of any recovery, with specific attention to one or more of the Dow stocks that led the recovery quite aggressively. Compare your findings with those cases where the fall in the Dow started later in the day or in the afternoon. Use the insight into the behaviour of Wall Street in relation to the Dow Jones that you obtain from this study to answer the second question.)
© 2002 Daan Joubert
[This is a slightly updated version of an article that appeared at www.gold-eagle.com early in 2000]
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