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To: Adamson who wrote (113)	1/13/1999 10:01:00 PM
From: Sword	Respond to of 330

Adamson: Yes, the market dynamics are different now. Aircraft and other machines use control systems to keep them stable. These are negative feedback systems. When an error in the heading or attitude is encountered a "negative" signal is input to the system to bring it back to normal attitude. In the stock market, the negative feedback is produced by the market makers. They are supposed to sell you their stock when you want to buy it and absorb some of the market dynamics. Sometimes, in a machine, the controller motor or actuator can't bring the system to stability because it just doesn't have enough power or range. This is called saturation and causes oscillations that sometimes result in catastrophic failures and crashes. In the NASDAQ, this occurs when the MM's reach the limit of their capability to absorb the dynamics...they too saturate and the market will inevitably oscillate wildly. When the NASDAQ lowered the requirement for exposure they made saturation occur with even less volume. This combined with the vast influx of capital into the markets is causing saturation, oscillation and instability in prices. We are now seeing the results. -Sword