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Specialist Frank Masiello is reflected in his screen on the floor of the New York Stock Exchange, Monday, Aug. 24, 2015. U.S. stock markets plunged in early trading Monday following a big drop in Chinese stocks.Richard Drew/The Associated Press

Panic selling, margin calls, short covering, air pockets, circuit breakers.

It was a wild day on the trading floor.

"One of the most volatile sessions I've seen since 08-09," said John Zechner, chairman of J. Zechner Associates Inc.

The S&P/TSX composite index plummeted more than 700 points at the market open. U.S. stocks fell dramatically, too, with the Dow Jones Industrial Average and the S&P 500 nosediving. The catalyst, as it has been over the past week or so, was China. Over the past decade, the Chinese market has been the engine of world economic growth. But with its prospects looking increasingly shaky, Chinese stocks were hammered again Monday. Selling pressure quickly spread around the world, hitting every major stock and commodity (apart from gold) market.

"Things were crazy," said Diana Avigdor, head of trading at Barometer Capital Management, commenting on early morning trading.

She was in the thick of things, amid the panic selling and dramatic swings in the runup to the 9:30 a.m. open. The selling pressure became so extreme in the premarket that circuit breakers were put in place in some markets, such as S&P 500 futures, that prevented people from selling. The idea behind circuit breakers is to introduce an element of calm in an environment of calamity.

"It was definitely one of these panics where traders ran away with the fear in the marketplace," said Aaron Fennell, futures specialist with ScotiaMcLeod.

The "breakers" came off at the market open. Then, chaos: The Dow plunged more than 1,000 points in the first few minutes of trading, with blue-chip names such as Apple Inc. and Walt Disney Co. tumbling.

In that kind of environment, the priority for traders is getting a position off the books. Price become a secondary consideration. At the same time, scores of traders were forced to raise funds to settle with dealers on stocks bought on margin.

"The reason for the breakdown, for the major air pocket, was pretty massive margin calls," Ms. Avigdor said. "So it forces people's hands and then they're price insensitive."

But then something funny happened. About 15 minutes into trading, seemingly out of nowhere, sentiment improved, and all major North American stock market indexes bounced back.

"At some point traders step in and say, 'It's time to get a deal,'" Mr. Fennell said.

"A lot of people have been sitting on the sidelines waiting for a correction, which is why I think you saw such a snap-back rally," Mr. Zechner added. "We were buying ourselves."

Mr. Zechner bought long positions in Apple, FedEx Corp. and a couple of beaten-down energy names. He also did some short covering for his hedge fund. It was that kind of buying en masse that brought the market back on its feet. After quickly selling off, the S&P 500 gained back 75 points in a matter of minutes.

"You don't sometimes get 75 points in a whole day's range, never mind 10 minutes," Ms. Avigdor said.

But even the recovery was short-lived. A late-day collapse sent the Dow, S&P 500 and S&P/TSX all to close down more than 3 per cent on the day.

The buzzword, back on the street after a prolonged absence, is 'volatility.'

"I think this is far from over," said Mr. Zechner, who predicts more volatility and more downside over the coming weeks, particularly in the United States.

Mr. Fennell points out that since the financial crisis of 2008-09, stock markets have generally barrelled upward with little volatility. Those days may now be over.

"I've learned that predicting the S&P 500 is very difficult to do for more than a day or two," he said.