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Biggest Plunge Since Crash Of '87

BIGGEST PLUNGE SINCE CRASH OF '87

Once again, investors sent the Dowplunging as they tried to come to terms with a new reality, a new economy, a new demand cycle and a new banking system.

Wall Street had its worst day since the “crash of 1987” as bleak economic data fed worries that all the efforts to unlock credit markets may not stave off a severe recession.

Federal Reserve Chairman Ben Bernanke added to those concerns when he said the economy faced a "significant threat" from paralyzed credit markets.

Going Into Thursday

I see three issues, says Dylan Ratigan. First, we allowed our politicians to create a flawed system of housing finance. Number two the electronic aspect of the market is not equipped to deal with this level of volatility, and three the Lehman bankruptcy had a ripple effect with unimagined consequence.

At the end of the day it’s a small number of people who screwed things up for all of us, adds Joe Terranova.

What about accountability? asks Tim Seymour. Lehman was a major confidence buster in this whole mess and no one is taking any responsibility.

In terms of the day’s market action Europe was the “tell”, observes Pete Najarian. They sold at the open and the selling continued until the close. Investors don’t know the rules anymore. There’s money on the sidelines but it’s waiting to find out more.

I think Wednesday’s sell-off was all about big investors getting their books down, adds Seymour. But I suspect hedge funds are in better shape than many people think.

I disagree, counters Pete Najarian. I think hedge funds are liquidating out of sheer necessity.

But don’t forget that traders live for volatility, reminds Guy Adami. I think there are some people out there who are having a field day.

The Bottom Line: We need to address the mechanics of this market that are amplifying volatility in this market and recognize the Lehman bankruptcy destroyed confidence in the investor community by trapping money overseas.

How To Trade?

I’m a guy who measures risk, says Pete Najarian. There’s been some great opportunities along the way. I like Citigroup. I’d buy this stock and sell the November put option.

In the past 5 days, the Dow touched the 8,000 point floor and topped out close to 9,800, explains Guy Adami. I expect the market will trade in this range. If the Dow holds around 8,000 I think the upside move will be massive.

And if you’re looking for a specific stock, I’d take a look at Wal-Mart , adds Adami. Nothing has changed fundamentally for this retailer.

I’d play the PowerShares DB US Dollar Index Bullish , adds Joe Terranova. Dollars are the one asset that are moving higher.

I’m worried about some of the resource names such as Freeport McMoRan, Petrobras and Vale , adds Tim Seymour. I had been bullish but now the charts worry me and I think they could go lower.





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Trader disclosure: On Oct.15, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AAPL), (MER), (MSFT); Seygem Asset Management Owns (RIO); Seygem Asset Management Is Short (PBR); Najarian Owns (AAPL) And (AAPL) Puts; Najarian Owns (C) Put Spread; Najarian Owns (GS), Is Short (GS) Calls, Owns (GS) Put Spread; Najarian Owns (MS) And (MS) Puts And Is Short (MS) Calls; Najarian Owns (NOK), Is Short (NOK) Calls, Owns (NOK) Puts; Najarian Owns (RIMM) Call Spread; Terranova Owns (AAPL), (EXM), (FCX), (FTO), (MA), (NOV), (POT), (X), (VLO); Terranova Owns December Dollar Index Futures;

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CNW), (OFC), (DLM), (DRH), (DLR), (EPR), (EXR), (FL), (SLB), (LNET), (MAC), (DBC), (DBV), (SKT), (UA), (BLV), (VV), (CLB), (GWX), (IGE), (FSMXX); Virtus Investment Partners Owns Seagate Tax Refund Rights; Virtus Investment Partners Owns Seagate Technology Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Incitec Pivot Ltd.; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.

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