The 45 Minute Stock Market Crash, Market Timer Frank Kollar

May 7, 2010 (FinancialWire) (By Frank Kollar)

At about 2PM on Thursday, May 6, the U.S. stock market crashed. Really! The S&P 500 Index (SPX) was down 8.5% at its intra-day lows. The Nasdaq 100 Index (NDX) was down 10.1%.

Some of the Canadian indexes had 15% intra-day losses. The Dow Jones Industrials (DJIA) were off 998 points at the bottom.

Then presto, the markets reversed and climbed back to 2% and 3% losses in a matter of minutes. By the close most of the major indexes were off around 3%.

It was a 45 minute market crash and a one hour market recovery.

What could have caused such a steep and fast decline? And what caused it to so quickly recover?

According to news sources someone made a bad trade, posting a Dow stock loss that caused the Industrial’s index to instantly lose 150 points.

That set off sell programs as computers jumped in and within minutes, the market crash was in full swing.

When the same stock that was the cause of the start of the selling was then posted with the correct trade, the Dow Index jumped 150 points, and the buy programs began kicking in.

Of course millions of traders watching this added to the panic as they tried to get out of the way of what appeared to be a crash that would continue to unknown depths. Many lost a great deal of money I am sure.

We may or may not have lower lows ahead. Maybe the lows on Thursday were the end of the correction. Maybe.

But everyone should take heed. Free markets can react in ways unpredictable by anyone. No one can know ahead of time that such an event will occur (or they would have sold on Wednesday).

Following well thought out trading strategies that incorporate strong money management rules are all we have to protect us from the wild, wild markets.

The financial markets offer huge opportunities but those opportunities are accompanied by risk.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.

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