How the DOW Really Crashed Another 250 Points On Thursday

While data showed that the Dow Jones Industrial Average crashed 998.50 points on Thursday May 6, 2010, it actually crashed 1242 - another 244 points.

Here is how...

The DJIA only uses quotes from the NYSE to calculate the average, not off-exchange quotes. The off-exchange quotes happened to be the lows for many Dow stocks. As an example, Procter & Gamble Co. (NYSE: PG) traded at low of $39.37 off-exchange, but the NYSE had a low for the day of only $56. This is because circuit breaker triggered at the NYSE on some Dow stocks and they were not traded for 30-90 seconds. During this time, some of these orders were routed to other exchange were they were traded at the lows.

These were not bad trades either. All trades in the Dow stocks will stand. Some other trades were canceled by the NYSE and Nasdaq, but only those greater than or less than 60% away from the consolidated last print in that security at 14:40:00 or immediately prior.

So if you add all the lows of the days in all the Dow stocks, like $15.15 for General Electric (NYSE: GE), $67.98 for 3M (NYSE: MMM), $31 for Walt Disney Co. (NYSE: DIS) and dividend this by the Dow Divisor which was 0.132319125 as of April 22nd, 2010 you get to 9625.97.

Does 250 points matter in the "flash crash of 2010"? Well for technicians it may. Also investors should be aware of how messed up the system is when the Dow can crash 11.4% in a few minutes.

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