MarketPOV: Flash Crash

The "Flash Crash" really was scary for anyone who traded through it and in a way reminded all market participants of the fury which can occasionally be unleashed so swiftly and severely.

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The above is a 1 minute chart of the emini S&P 500 during the day of the flash crash. As can be seen, a lot of volume chased the market down resulting in a crescendo where the low point also experienced the highest volume before turning around and retracing most of the move rather quickly.

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The emini Nasdaq also shows an identical move of a high volume peak as the market found bottom before screaming up.

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Front month eurodollars had a similar move which tracked equities as often is the case during market panics and the contract had a 15bps fall in a matter of minutes. Something was definitely weird about the day and I can remember getting as hedged as possible right before the spike down which really saved me that day. From what I recall, the order book was ultra thin and selling an offer was impossible before the freefall and that's as sure as sign on what direction the market is going.

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On the flipside, the eurodollar contract a year further had a flight to safety spike which virtually mirrored the front month's move.

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Which resulted in the M10/M11 eurodollar spread to move from 75 before the move to as low as 42.5 with the vast majority of that happening in a few minutes. Another chart which hurts to look at just thinking about how painful it'd be to sit unhedged on.