By Chris Rowe - Creator: Technical Analysis Millionaire
First and foremost, on behalf of the IFII family, our hearts, thoughts and prayers go out to the innocent victims of the Boston Marathon bombing as well as their families.I am 100% confident that those behind this tragedy will be brought to justice because our military and law enforcement now have extensive training and 10+ years of experience at tracking down COWARDS who organize this sort of violence.
The markets certainly reacted to the bombing, but keep in mind that most of the selling had already taken place by that time.
Gosh, how do I turn this tragic event into a trading lesson of some sort...
It started out a very odd day. It was almost eerie.
Gold had made its steepest 2-day decline since 1980. We woke up to the yellow metal being down over 100 points, eventually declining about 10%. What was stranger about the decline than the 16% loss was that it seemed nobody could really put their finger on the exact reason. Sure, everyone had something to say about it and the media must report some reason. But while many reasons were given, none seemed to explain such a dramatic sell off.
Then, with a lower open, the stock market relentlessly sold off throughout the day. Again, there wasn't a huge reason for it. Just a poo poo platter of reasons given all at once.
Then, at about 2:45, after constant selling throughout the day, a bunch of volume came into the market (black circle below) and prices made a sharp reversal higher (green rectangle). I mean, it was the kind of sharp advance that makes a trader cover her short positions for the time being.
One reason a trader would do this is that the momentum indicators moved from oversold to overbought in an unusually swift manner (blue rectangle). When we see momentum indicators swiftly move from oversold to overbought or vice versa, it signals a likely bullish reversal or vice versa.
We saw such a bullish reversal signal in the RSI (the most common momentum indicator).
But just a few short minutes after momentum indicators gave us that little known signal and the market jolted higher on heavy volume, markets took an immediate dive on even sharper volume!
The RSI came crashing back down with the market. Those glued to their computer screens didn't immediately know that two bombs had just exploded. All they knew was that the markets had ferociously sold off, reversing the attempt at a bullish reversal.
All of a sudden, "market" orders, to enter or exit positions, weren't being reported or confirmed! In other words, people were trying to exit or enter positions by entering "market orders" as opposed to "limit orders". A market order is supposed to guarantee you get in or out of your position immediately at the current asking price or bid price, respectively.
But minutes had passed and several minutes after those orders were entered, customers were not seeing any confirmation that they were executed. There was no report on whether those buy and sell orders were being honored! All this while prices were fluctuating -- in the case of option contracts, they were fluctuating by 30, 50, or 100%!
I looked at the bid-ask spreads. The bid prices were even HIGHER than the asking prices! This doesn't make sense, as the bid price is supposed to be the highest price anyone is willing to pay and the asking price is the lowest price anyone is willing to sell at. It was complete chaos!
$4.30 (bid) - $3.20 (ask)
The exchanges were having trouble reporting!!
What on earth??
So everyone was stuck in positions as they plunged... brokers stopped picking up their phones... and quotes provided by the exchanges were no good!
We got a small glimpse of the modern-day 1987, when investors who saw their stock drop from 100 to 80 were unable to reach their brokers to sell as the stock continued down to 20.
So here's the lesson...
As crazy as yesterday seemed (and it was), I see more craziness coming very soon.
In fact, I'd like to prove it to you by sharing 4 very strong pieces of evidence that we've got more craziness ahead of us... possibly even another crash. If you're not prepared for it, then at least be prepared to suffer the consequences.
That's why I've decided to hold an urgent Live Event next Thursday, April 25.
In this live webinar I'll show you the evidence, PLUS several signs I'm seeing right now, which happen to be the same ones we've seen right before every crash in recent memory.
I'll also show you exactly how to play a potential crash with minimal risk -- I'm talking specific strategy and action here. I'll also offer a steep discount to a "crash course" on how to turn a horrific market into a wealth builder for you.
Again, I'll show you how to play all of this for FREE.
For more details and to sign up, just go here now.
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An internationally respected authority on options, 9-year Wall Street veteran, and co-founder of Institute for Individual Investors, Chris Rowe spun out profitable trades for his Trend Rider members for 7 years, ending with his retirement in 2012. While most professionals consider an options trader who is right on 3 of 10 trades to be very good, Chris was right on the majority of his trades! Now, through his weekly "Technical Tuesday" Tycoon Report articles, Chris Rowe helps hundreds of thousands of investors across the globe, demonstrating the benefits they'll realize by taking a dispassionate, business-like approach to both stock and options trading. In his thorough and detailed, yet easy and accessible courses, you'll learn directly from Chris how incredibly easy it is to consistently make money - in bull markets, bear markets and flat markets - when you use a proven system for trading success. |
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