Stock Market Crash Background

Most people arriving at this web page are likely feeling a bit tense due to some sort of stock market crash (large, extreme or sudden stock market declines) they have or are currently personally experiencing looking for some sort of background information to ease the pain.

Yet others still may find themselves reading up about historical time periods in the stock market to better prepare themselves for any and all future possibilities. (Good for you!)

The page below is my general information page on a stock market crash. I have written a separate page here on the 2008 Stock Market Crash and am working on an updated one for 2011.

A stock market crash usually consists of: market bubbles and/or underlying economic situation(s) along with widespread panic selling. Occasionally, global violence such as wartime or terrorism may cause a crash as well, but these incidences usually are not as long lasting as one's due to economic situations.

I remember watching my stock charts the morning of specific terrorists attacks and the markets opened at their lows, and recovered the rest of the day.

Although there is no numerical breaking point to be considered a crash, historically, there have been several time periods considered as a stock market crash due to their extreme levels of decline and associated widespread panic selling. The longer you go back in time, the more so-called "crashes" you are likely to find.

One such global example occurred in the Icelandic Stock Market in October, 2008. Trading was suspended for a 3 day period while nationalization of their banking system took place and upon the markets opening again, the Icelandic Stock Market Index opened approx. 76%-77% lower. (and hasn't recovered since then, more than 2-1/2 years later)

Coinciding with the timeframe of the Icelandic Crash above were other global crashes including in the U.S.:

-S&P500: September 15, 2008 Weekly High: 1255.08 - October 6, 2008 Weekly Low: 899.22 (-28.35%)

In the U.S., other recent examples include ones such as:

-Nasdaq Composite Index: March 6, 2000 Weekly High: 5048.62 - September 30, 2002 Weekly Low: 1339.90 (-73.46%)

-Nasdaq Composite Index: October 27, 2007 Weekly High: 2810.37 - March 2, 2009 Weekly Low: 1293.85 (-53.96%)

(Note: The Nasdaq is currently at 2357.69 on August 8, 2011, which is still 53.3% below its March, 2000 Weekly high, more than 11 years later.)

-DOW Jones Industrial Average: October 8, 2007 Weekly High: 14,093.08 - March 2, 2009 Weekly Low: 6626.93 (-52.98%)

-S&P500: October 8, 2007 Weekly High: 1561.80 - March 2, 2009 Weekly Low: 683.38 (-56.24%)

-S&P500: July 25, 2011 Daily High: 1345.02 - August 8, 2011 Daily Low: 1119.46 (so far) (-16.77%)

-Nasdaq: July 22, 2011 Daily High: 2858.83 - August 8, 2011 Daily Low: 2357.68 (so far) (-17.53%)

- On May 6, 2010 a Flash Crash as it is now called, occurred. The U.S. major market indices dropped approx. 9% during the day, with most of the drop occurring within 15 minutes around 2:45 p.m. (I remember taking a screenshot of this as it was happening so I'll post if if I come across it). By the time the markets closed that day, they had recovered almost all of their declines. Several stocks including some Blue Chip stocks, dropped 30% or more during this time period, only to bounce back several minutes later.

After witnessing a stock market crash for a day or two, or even several days-weeks, the emotional strain becomes overwhelming to some. Add in the fact that the media pounces on all of the negativity, doom and gloom, and panic selling ensues. This typicaly is accompanied by some sort of rebound and the media then reverses course, while many individual investors without any type of exit strategies to begin with become more upset because they realize they now sold at market lows during the panic.

So, prepare yourself ahead of time for the possibility of any type of stock market crash by having a strategy in place that details what to do in both good times and bad times. Money can be made during up and down markets, losses can be kept to a minimum and panic selling usually brings about opportunities to take advantage of if prepared for ahead of time.

Continue here to read and explore one of my other articles with historical stock charts about the 2008 Stock Market Crash.

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