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Friday, May 7, 2010

Does this look familiar to you?

This is what happened to the Dow Jones Industrial Average Thursday May 6th.

Now look at my post regarding POZN from last week.

Now look at them side by side...

I'm not sure, but it certainly looks like the same programed buying and selling patterns and glitches were in effect for both events.

Unconfirmed reports regarding Thursdays Sell Off of the entire market say the following...

CNBC reported that numerous sources said that a trader entered a "b" instead of an "m" for million in a trade possibly involving Procter & Gamble (PG), a Dow component. The trader reportedly placed a sell order of $16 billion, instead of $16 million, worth of e-minis, futures contracts tied to equity indexes.

This incorrect trade sent stock future prices so low that it even triggered other programed sell events to take place which in turn caused others.

And so on and so on. Of course, prices dropped to a point which kicked in programmed buy options. Which drove prices back up.

Not too far off from my "somebody sneezed and hit the OMG it's Armageddon button" reasoning for POZN's chart.

It is mind boggling to think that a typo could cause such an event.

I mean really, how do you mis-type Million by typing Billion? The keys are close but not next to each other

and if my own fat fingering typing skills are remotely correct (I use the ancient two handed / 10 finger technique) instead of the ever popular hunt and peck with only 1 finger technique...

one types each with different hands.

I still say somebody sneezed and missed the button / key they meant to hit.

So in reality, last weeks anomaly and Thursdays were probably caused by the same "glitch".

A Sneeze.

And to that we should all say a collective

Bless you.


Dave Miller May 7, 2010 at 1:36 PM  

I waited to see your take on all of this. It is scary to think that something a small as a bad keystroke could cause all of this.

But.... if that was the sole reason, why has not the market recovered the whole enchilada?

Don't you think there is some real fear of the situation in Europe, and if so, what might that bring as we move forward?

Doug May 7, 2010 at 1:50 PM  

Dave, I think there is real concern about Greece and Europe.

In fact, I listened to discussion on that during my morning commute that the Europeans should use what the Fed did as a model and act more quickly.

Of course, there is also the thought that bail out only create different problems to be addressed in the future.

The biggest problem is not clearly acting to an issue which is EXACTLY what is happening in Europe.

The fat finger issue also has conspiracy wrapped around it in the form of financial terrorism. But in reality it only highlights the underling issues regarding our dependency on computer based trading.

What I do NOT understand is the commissions canceling orders that took advantage of the crazy dip and setting a 60% limit on such activity.

In other words, a trade which took place for Accenture at a few dollars per share only to see the price bounce back to near its 30 - 40 range is canceled.

Where as a trade which took place when Apple dipped 40% to below $200 per share only to recover IS allowed.

It does not fix anything and still undermines confidence in the system.

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