Is this a stock market crash for ASX 200 shares?

ASX 200 shares have slid rapidly today. Even the big blue chips have been hurt. Is this a stock market crash?

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A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash

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Key points

  • The ASX 200 opened with one of its worst falls in years this Tuesday
  • The ASX 200 is now back around 6,600 points after closing at more than 7,000 points last week
  • We are certainly in a correction, but not yet a crash, according to technical definitions 

Fresh from a long weekend for most states (and the ASX), many investors would have experienced a rather firm trip back to reality this morning when the Australian share market opened.

The S&P/ASX 200 Index (ASX: XJO) last closed at just a tad over 7,000 points on Friday. But today, the ASX 200 index has plunged a painful 4.7% so far today and is now approaching 6,600 points.

It’s been a brutal day of selling so far. Blue-chip ASX shares are falling, including Commonwealth Bank of Australia (ASX: CBA) down 4.8% and BHP Group Ltd (ASX: BHP) down 6.2% at the time of writing.

Even the ‘safer’ blue chips like Woolworths Group Ltd (ASX: WOW) and Telstra Corporation Ltd (ASX: TLS) have lost more than 2%.

So after such a decisive plunge, many investors might be wondering if we are now in a stock market crash. It’s certainly beginning to feel like one.

Is the ASX 200 in a stock market crash yet?

Let’s see if we can officially apply this dreaded moniker.

A share or stock market crash isn’t just an arbitrary event. It is generally accepted that for a market downturn to be called a stock market crash, it must involve a fall of 20% or more from the most recent market peak. A ‘correction’ is a fall of 10% or more.

So the ASX 200 last peaked at 7,632.8 points back in August 2021. Today, the ASX 200 hit a new 52-week low of 6,566.1 points. That represents a drop of 13.98%. So a painful correction, one could say.

But we aren’t actually in stock market crash territory just yet. To be in a crash, the ASX 200 would have to descend to around 6,106 points. And (thankfully) that is a level we have yet to cross.

The last true stock market crash was the infamous ‘COVID crash’ of 2020. In the space of just a few weeks, this crash saw the ASX 200 lose a gut-wrenching 32% of its value over March and April 2020.

That’s what an extremely rapid and painful stock market crash looks like. The current ‘correction’ we are experiencing could get worse, of course. But as it currently stands, the ASX 200 is still avoiding a full-on crash.

No doubt investors will be hoping that the rest of the trading week gives ASX 200 shares some breathing room. But we shall have to wait and see.

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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