Musings on the Dow Dive
Last Thursday, during the stock market “glitch”, I tweeted the following.
* Stock market is crashing, -700 or more. I’m in gold & silver. This is entertaining, just not for others. 2:47 PM May 6th via web
* Scratch that, down 900. Where’s that golden parachute? 2:48 PM May 6th via web
* Cramer says a glitch dropped the Dow ‘only’ an extra 400 points – still down 463. If that ‘glitch’ was engineered, someone cleaned up. 3:02 PM May 6th via web
* Dow is down now about 500 – no one is seeing the trend over the day, only the spike – I predict a close between 10400 and 10350. 3:31 PM May 6th via web
It did not close in that range. At the end of the day I tweeted this:
Dow closes -348, @ 10520. What was wrong with my analysis? I didn’t anticipate the trend would break. Hey, I’m still green for the day. 4:09 PM May 6th via web
What trend was I referring to? The one in this graph:
Shown is the Dow for Wednesday, Thursday and Friday at 1-minute intervals, from Scottrade. Thursday is between the two vertical lines, with the afternoon spike clearly visible. A red line has been added that refers to the trend I saw if the spike was disregarded as “bad data”. Note the trend, projected forward, ends at around 10,200 – my estimate was off as to where it would end, but that would have been a 600 point drop for the day, as opposed to a 400-450 point drop I predicted. As it was, the market ended down “only” 348 points – nothing to ignore, but certainly nothing to get excited about.
Unless you were in gold.
Now, notice what happens around 3:30 PM. The trend is broken, and a recovery begins. That reversal adds approximately 160 points to make the close at 10,520. Such reversals at the last half hour have been observed before by others, in both directions – up when the market was sinking, down when it was climbing. As to the cause of such reversals I can only speculate blindly, since I have no data. Some have suggested it is evidence that someone is placing massive bets on the market moving in the other direction, while others suggest it is the opposite. Not being fluent in the ways of the markets and their machines, I have no idea if they are right or not. All I know is that hard assets, by which I mean tangible precious metals you hold in your hand, are not subject to such manipulations, if they exist. Even paper assets that serve as replacements for the tangibles, such as the GLD and SLV exchange traded funds, are not immune to possible manipulation.
Some data points from the graph, also from Scottrade.
Open: 10869
1427: 10623
1445: 10040
1447: 9981
1459: 10437
1502: 10419
1526: 10365
1600: 10520