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Strategies & Market Trends : The Stock Market Bubble
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To: Lazarus_Long who wrote (3068)2/25/2000 5:34:00 PM
From: Michael Collings  Read Replies (2) of 3339
 
Re the Nasdaq rallying in face of the Dow declining, it is possibly the worst scenario that could happen. Selling the liquid NYSE stocks to buy an illiquid Nasdaq while at the same time margin debt being at an all time high is setting us up for a catastrophe.

The Nasdaq is not liquid, the Nasdaq is not liquid. Say it again and again. Nasdaq market makers are not required to make a market and therefore the Nasdaq market is not liquid. Unlike the NYSE where the specialists are required to make a market regardless of conditions, market makers on the nasdaq can choose to simply not play.

That means that orders to buy and sell "at the market" do not have to fill. We saw that in 87 during the crash. Market orders came back with "nothing done".

Now imagine all the margin calls coming and not being able to sell your stocks at any price! It will take the Dow down a great deal more and all those trapped in Nasdaq stocks will stay trapped. By the time you can make the trade, your Nasdaq stocks could be down 75% or more. What I don't understand is why NO ONE is pointing out this danger on CNBC or anywhere else. Does no one remember 1987?

Everyone is jumping into the Nasdaq. I wonder just how they all think they are going to get out of it? If you own any, and I mean ANY, nasdaq stock, think very carefully about how you will respond if the nasdaq starts down and you can't get out.

This is a very very dangerous situation.
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