Summer Sequel Season Starts Early With Fears of 'Flash Crash II'

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Stocks and commodity markets are down huge today, one year after the so-called “flash crash” saw the Dow drop 900 points in a manner of minutes. The sell-off began in the commodity markets, with oil prices steadily dropping throughout the day. Oil prices closed below $100, a significant drop on the day. Across the board, silver and gold values are melting before traders eyes, with gold closing down from $1516.40 to $1470.20 and silver down from $39.41 to $34.45 on the day. The downturn comes nearly one year to the day of the massive, May 6 market crash, where investors suffered through the largest one-day decline in the history of the Dow Jones. The market quickly regained a large portion of its losses, but for a moment, the temporarily loss in market cap stood at roughly $1 trillion. A series of changes came about after the market crash, designed to stop similar events from taking place in the future. These include everything from stock market circuit breakers -- temporary halts to trading when stocks move rapidly in price -- along with new rules marking erroneous or clearly damaging trades. The question investors must ask themselves is whether or not the regulations, or even the regulators themselves, are performing their duties as intended. Are the limits on trades enough to reign in the so-called algorithmic traders who allegedly drove the market to the brink and back last year? Some have suggested that the problem did not begin with last year's flash crash, but rather, with the introduction of technology into the trading floor. While the academic community has not coalesced around one answer, it has been suggested that the precursors to these technologies either exacerbated or were the cause of the 1987 market crash, if not both. It may well be worth watching after hours trading tonight and seeing how commodities and the Dow fare. If they rebound, this could be a small blip on the map. If they continue to sink and steamroll into tremendous losses, we may see the need for Congress and regulators to step up and come up with a new paradigm to limit the ability of computer traders to auto-trade the markets into oblivion.
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