Saturday, May 8, 2010

Stock Market Crash

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The stock market crash 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.

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