The markets went on a gigantic roller coaster on Thursday. The Street is asking Did Trading Error Worsen Market Plunge?

A dramatic drop in Procter & Gamble(PG) looks like the smoking gun. The stock went from $60 at around 2:45 pm ET to plunging below $40 in moments. The Dow Jones Industrial Average, which was already down triple digits, sank another 600 points in less than 15 minutes right around that time. It closed off roughly 350 points.

“That doesn’t happen unless someone made a huge mistake,” a trader that declined to be identified for this story told TheStreet about the P&G; trade. The same trader said the latest speculation was that Citigroup(PG) was the firm behind the wrong trade, mistakenly putting in a 15 billion futures sell order, instead of a 15 million one, but the company would not confirm or deny that.

Citigroup Find No Evidence Of Trading Error

The facts seem to show Citigroup was not to blame. Please consider Citigroup Finds ‘No Evidence’ of Erroneous Trading

Citigroup Inc. said it found “no evidence” that it was involved in erroneous trades after U.S. equity markets plunged today.

“We, along with the rest of the financial industry, are investigating to find the source of today’s market volatility,” bank spokesman Stephen Cohen said in a statement. “At this point, we have no evidence that Citi was involved in any erroneous transaction.”

New York Stock Exchange spokesman Rich Adamonis said “there were a number of erroneous trades” during a slide that took the Dow Jones Industrial Average down almost 1,000 points, its biggest intraday loss since 1987, before paring the decline. The Dow average ended the session down 347.8 points, or 3.2 percent, at 10,520.32 at 4 p.m.

The Nasdaq OMX Group Inc. said it’s working with other markets to review transactions during the plunge. Procter & Gamble Co. said it’s looking into electronic trading of the company’s stock to determine whether the trades were made in error. Its shares sank as much as 37 percent and closed down 2.3 percent.

I do not doubt there were erroneous busted trades during the crash. However, there is no admission or indication by anyone that an erroneous trade caused this cascade.


click on chart for sharper image

Regardless of what anyone finds, a trading error did not cause this collapse. The market collapsed because it was ready to collapse. A retest is likely coming up, especially if shorts covered in that dramatic rise off the bottom.

Mike “Mish” Shedlock
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