Market Fluctuations (4)

By now we’ve heard hundreds of theories about The Cause of the stock market crash. The investor class, banks and government then conspired to rally the markets by pumping lots and lots of money into it, and eventually by mid 1930, it hit a ‘dead cat bounce’ peak of 294, quickly pushing up another 90% to get it to early 1929 levels.

Unfortunately for many potential investors, these people did not have enough money to afford shares of stock. For example if I have $1000 and I wanted to buy $1500 of stock might broker would have lent me $500 on top of my original thousand dollars to reinvest into that stock. Mindless cheerleading from those in authority, who fabricated reasons for the market to increase when there were none. Yet, as soon as we start to see advancing SBV on this chart we may assume that the long- and mid-term traders start coming back which may lead the market up and which could be an indication of the rebound.

Besides the dramatic effect on investor psychology, the stock market crash of 1929 contributed to the creation of a variety of new laws, organizations and programs designed to improve the country’s infrastructure, further social welfare and prevent corporate fraud and abuses.Stock Market CrashStock Market CrashStock Market Crash

This meant that brokers were now allowing investors to borrow on top of their original investment to buy even more stock. The market continued its downward trend for a few weeks before stabilizing on November 23rd, 1929. The stock market opened at 305.85. It immediately fell 11%, signaling a stock market correction Trading was triple the normal volume Wall Street bankers feverishly bought stocks to prop it up. The strategy worked.

The stock market crash of 1929 is often associated with stories of investors and traders jumping out of windows after losing everything. As long as the stock market continued to increase in value, these investors did stand to make a profit. The market continued to soar during 1928 and much of 1929, with these twenty-five leading industrial stocks reaching the 452 point mark in early September 1929, almost doubling the stocks’ selling price in less than two years. The average trading volume on NYSE in 2007 was about 3.1 billion shares per day.