FMX | Connect – www.fmxconnect.com - (Reported 5/07/2010)
Excepts from Phil Roth’s Technical Perspective – May 7, 2010
Don’t worry about it, it was just some “high frequency trading.” No, it was just a “misread order”, a billion shares should have been a million shares. No, it was “rioting in the streets”, somebody else’s streets. We don’t scramble to find the “real” reason. It doesn’t matter. Thursday’s trading is what can happen when there are no investors on the other side of trader selling. Is a selling climax possible just 8 days after a new recovery high? We say yes. But that doesn’t tell us much about the upside potential since Thursday’s “selling climax” began just 7% off the high (using the S&P 500), reversed at about 13% off the high, and by the end of the day it was just 7% off the high again.
There was a swing, down and back, of $600 billion to $700 billion, or so, in just a half hour between 2:25 and 2:55. We wonder who had some open orders filled
The bulls had been saying “The market is climbing a wall of worry” in April. In retrospect, the market was naively levitating. Now the players are saying, “We should have sold and gone away.” A minor top, completed by most indexes on May 4, led to a pretty quick acceleration on the downside. The medium term uptrend was broken with the short term downturn; now the big question will be “Is the medium term trend down?” We don’t know that yet, but it is a good bet there will be an intervening rally of some kind prior to a clear answer to that question.
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