Margin debt - borrowing to buy stocks - has shot ahead of the S&P. It normally follows the index up and down. When margined stock gets ahead of the market, any significant drop is in danger of snowballing as stock is sold to cover the margin. Call it the old fashioned type of Flash Crash, of the sort we saw in 1929 when stock was bought with subprime margin (90% margin on 10% cash), or right after the Lehman debacle when TARP was pronounced (see chart, courtesy PragCap). How the 'bots might handle that we may find out - technicians are all over themselves with expectations of a 5-7% drop as early as tomorrow.
how much is margined etf's, i wonder?
those $40 gaps for gold and 15-30 ndx gaps have to be killing off a few poor slobs.
if you really look closely at the flash crash, it wasn't the declines before may 6th that got it started, it was the no bounce just before it started. nasty.
gld and q's trading would be a slaughter fest in half the time of the flash crash. 10 minutes would do it.
etf traders might be sitting on top of a crisco coated flag pole.
who wins with any fast correction?
the guy whose computer bids $.01 for some hapless stock about 5 minutes into the mini crash.
the SEC gets another chance to investigate evil markets.
blame it on bush.
wave rust
Posted by: Wave Rust | Tuesday, January 04, 2011 at 09:23 PM
That chart ends around SPX 1180, so it has actually _rallied_ over 7% since.
Posted by: Shooter McGavin | Tuesday, January 04, 2011 at 09:34 PM
As the old market cliche goes, "Stock markets climb a wall of worry". The misguided notion that margin loans predict anything is cute, and so 80s. What's really happening is that all those insiders who sold and all those individuals who panicked out at the lows are suffering from sellers remorse, and buying back in.
Do you ever look at bank stocks? Rumours of their demise are greatly exaggerated. As it becomes obvious that the banking sector is benefitting massively from 0% funding, stocks will get their next leg up.
The bear case is totally lame. I mean, when's the last time a bear made money? Last decade!
Posted by: Sherman "Double Long"McCoy | Wednesday, January 05, 2011 at 12:45 AM
ES Chart
http://niftychartsandpatterns.blogspot.com/2011/01/s-500-futures-before-opening-bell_05.html
Posted by: Account Deleted | Wednesday, January 05, 2011 at 06:29 AM
McCoy,
"What's really happening is that all those insiders who sold and all those individuals who panicked out at the lows are suffering from sellers remorse, and buying back in."
That is not true. If insiders were buying stocks that they previously sold they would have to file with the SEC. They have not. Thus, your statement is factually incorrect.
Posted by: ? | Wednesday, January 05, 2011 at 06:48 AM
>if you really look closely at the flash crash, it wasn't the declines before may 6th that got it started, it was the no bounce just before it started.<
Fact is, the flash crash was the culmination of a trend that just kept getting weaker and weaker. I had been on a sell signal for months, prior to it, if you remember correctly. One by one the legs were being pulled out from under the market until it hit an air pocket. Simple as that!
Neo-Mamma
Posted by: Mamma Boom Boom | Wednesday, January 05, 2011 at 07:27 AM
Neo-Mamma
Do u have an opinion for market deraction???
thanks
Posted by: jjjj | Wednesday, January 05, 2011 at 07:50 AM
jjjj, you betcha! It's well documented, just go back a few days, you'll find it.
Posted by: Mamma Boom Boom | Wednesday, January 05, 2011 at 08:18 AM
I am too old for this....thanks for nothing
Posted by: jjjj | Wednesday, January 05, 2011 at 08:51 AM
Sorry jjjj, didn't know you were old. Here's one statement I recently made:
This coming market correction will start on purely technical conditions. But, will evolve into the realization that we are only in the beginning stages of the largest financial collapse in the history of the world. Larger than the Tulip Bubble, larger than The Great Depression, and at least as large as The South Sea Bubble, of which the aftermath lasted 40 years.
The reason is because of the immense amount of fraud at the highest levels of government and with well connected business men. Never have these conditions existed in developed economies, only banana republics. And making the situation worse is the puzzling apathy of the citizenry.
The bottom line is: the bottom of this hole is a long way down. You heard it here, first.
Neo-Mamma
Posted by: Mamma Boom Boom | Tuesday, January 04, 2011 at 07:17 AM
Posted by: Mamma Boom Boom | Wednesday, January 05, 2011 at 09:15 AM
Thanks a lot.... but when???
Posted by: jjjj | Wednesday, January 05, 2011 at 09:32 AM
jjjj, soon. That is an intermediate forecast. For example: after the flash crash, right at 1040 at the end of May, I put out a buy signal. Just about everyone was looking for the market to tumble a lot further. A look at a chart will tell you I was a little early. But it was a heck of a call. About 2 weeks ago I switched to the sell, and it is proving to be a little early. It's not a short term indicator, I have others for that, and they are still in limbo caused by low volume over the holidays. But, soon the short term picture will clear up and we'll be 100% in gear.
Hope that helps.
Neo-Mamma
Posted by: Mamma Boom Boom | Wednesday, January 05, 2011 at 10:22 AM
Thank you very much
Posted by: jjjj | Wednesday, January 05, 2011 at 11:03 AM
Mamma, the bond bubble is what you are referring to?
Posted by: Sobranie | Wednesday, January 05, 2011 at 11:15 AM
Sobranie, if you mean debt bubble, then yes that's a major portion of it.
Posted by: Mamma Boom Boom | Wednesday, January 05, 2011 at 11:36 AM
The Statue of 3 Lies reveals the truth.
Posted by: Jacques DeMolay | Wednesday, January 05, 2011 at 03:55 PM
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Posted by: Fibonacci levels CFDs | Thursday, January 06, 2011 at 01:10 AM