Trader Talk

Stocks Fall On "Snowball" Effect


Here’s a good example of what can happen on a low volume, low volatility day. Small, disconnected events can snowball, short-term technical levels can breached, and suddenly the S&P is down 20 points in 30 minutes.

What happened?

1) Started with BIDU dropping after JPM cut estimates

2) NASDAQ 100 began dropping right after that

3) Then Axel Weber, the head of the Deutsche Bundesbank and ECB Governing Council member, said the ECB may need to raise interest rates to counter the rise in prices. Mr. Weber said that inflation stability has priority over economic support.

When you get sudden mini-corrections, the groups that have moved the most are the ones where you see quick, sharp profit-taking: tech and energy.

Questions?  Comments?

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