Stash Cash for Next Flash Crash
by Paul J. Lamont
June 7, 2010
Back in February we stated: “As the chart of the Crash of 1987 below demonstrates, the 3rd wave of a market decline is usually the most distinct.” With the third wave now underway, the Wall Street Journal is reporting on the parallels between the Crash of 1987 and May 6th’s Flash Crash. We suspect that the comparison will transition to the Crash of 1929 as the selling continues. Here is why:
A Must Listen
The rumor (reported as news) that the drop was merely one trader’s error was refuted by this 11 minute audio clip from the S&P500 futures pit during the 1000 point fall. Clearly, markets are not rational calculating machines as some professors would have us believe, but a herd of emotional participants.
The S.E.C. report describes the stock plunge of Proctor and Gamble on May 6th this way: “PG declined from more than $60 to a low of $39.37 in approximately 3.5 minutes,” the report said. Then the stock recovered above $60 in about one minute.”
This not only happened to P&G but numerous other S&P 500 stocks. There is precedence for this lack of liquidity (buyers AND sellers) in the stock market. It was Black Thursday; Oct 24th, 1929: