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Strategies & Market Trends : Analysis Class for Beginners

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To: Arthur Tang who wrote (631)	10/24/1997 11:07:00 AM
From: Arthur Tang	Read Replies (1) of 1471

Why mini crashes have a secondary mini crash a week later? In market making, there is ebb and flow. Money flow into the market and money flow out of the market; like a tide. A crash is always related to outflow of money; granted smaller amount than the original in flow at a higher market value. So, immediately, after the crash, the market bounces back at about half it lost. Some investor will rush in to buy the discounted stock and bonds. The market will recover some. Then cash surplus are again placed in the market; the market will suffer liquidity shortages. Thus the secondary crash happens. You might believe that. If you look at the market makers' view point however, they move the price down too much created a fear or a panic. When oversold condition prevails, market makers move prices up. Then overbought condition happens, the secondary crash occurs. For individual investors, you watch the oversold or overbought conditions only. Let the top down economists make the mistake of quessing money flows in and out. Because everyone of us are 100% fully invested at any time.

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