Market Crash

Very nice volume we had today during the crash. It does not matter what was the reason, "computer glitch" or Greece crisis, the market hit down eat, all stop-losses and when there were nothing more to eat it bounced strongly up. Such strong volume means that the institutional traders were buying from those who placed stop-loss orders. All this high volume mean that, now, most likely we have oversold condition when we may have luck of bearish traders to support further decline.

It was crazy day, It was almost impossible to buy (many orders bounced back canceled), still, I like it, because such huge volume surges are clear signals of possible reversal. We still may see some volatility and maybe some decline, yet, I would expect to see the indexes (DJI, Nasdaq 100, S&P 500 and other) moving up.

I'll try to post my view of a "computer glitch" during the week-end.

Posted byTraderJoeat8:45 PM

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Stock Market Crash

The on Thursday May 6, 2010 is quite interesting. Someone may even call it very suspicious by the following reasons:
1. It happened when market was already in decline.
2. The indexes dropped to the lows seen in February 2010 - where the majority of stop-losses were set (support levels always were sensitive for many professional and retail traders).
3. It looks like somebody new that something has to happened and that somebody fix profit in the second half of April 2010 - see high volume surges in that period at the resistance.
4. The huge number of stop-losses were traded and somebody bought them - see huge volume during the crash on May 6 - 7, 2010.

Isn't it suspicious that somebody was fixing profit in huge volumes in the April and than we had "human or computer error by accident" and then somebody was buying in huge volumes during the crash...

I think that, now, after "Goldman Sachs Scandal" everybody knows that it is "OK" for a broker to trade against it's clients. I'm just wondering: is it true that brokers know where the majority of stop-losses of their client-traders are set?

When the Government set a new Law for Credit card Companies, before that Law took affect, almost all credit companies raised rates and introduced additional various fees. When The Government pass Health Care Bill  by which pre-existing condition should be treated, some insurance companies started to through out clients who have pre-existing condition before the new Law is in force. Now, the Government is working on the Wall Street Bill, I am wondering how Wall Street will do the last days of its freedom???

All the above are just guesses and we, simple people and simple traders, will never know what really happened. However, what we can do is to monitor through volume the action and manipulation of big  institutional traders. The first rule is that if you see increase in volume that means that the big traders are in action. If you may spot it then you may try to interpret it and build your trading strategy accordingly.

P.S. Tomorrow I'll try to post some technical analysis points and my view on possible further trend development.

Posted byTraderJoeat8:27 PM

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Another Crash

As I mentioned in my previous post (see "Short Technical Analysis" post on May 31, 2010) "If we do not see up-side reaction on that volume tomorrow or the day after tomorrow then I would consider a possibility of retesting the Lows seen on May 25, 2010."  - we had side-way volatile trading at the beginning of the past week with strong decline on Friday, June 4 of 2010.

The Friday's decline wiped out almost all gain of the past two weeks. Now we are getting close to the May 25th bottom.

As with majority of the strong declines, the indexes (Nasdaq 100, NYSE Composite, DJI, S&P 500, etc) have generated strongly oversold signal: strong increase in volume during decline (volume surges) and extremely low Breadth (advance/decline) indicators readings. From one side these oversold signals indicate panic selling and possibility of shift in supply and demand balance which could lead to a bounce up.

From other side, we had too many similar signals (7 by my count) over the past month. In majority cases we had bounce up after such signals, however, all of them were short lived and the indexes are still at the bottom. Another negative factor is the high volatility level. We do not see a decline in volatility which tells that the stock market continues to be very sensitive and we may see any time other strong declines.

It is difficult to believe that we are going to face another stock market crash or strong recession. I would rather say that in period from March 2009 until April 2010 the stock market went too far and too fast (it was driven by institutional speculators and not by economy). The economy does not develop so fast and now it could be a time to level it up.

Posted byTraderJoeat5:08 PM

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