Thursday, September 23, 2010

The First Flash Crash

The NASDAQ bubble of 1995 - 2000 was the greatest stock market bubble in history.  It was the time of Internet stocks going public and cashing out with no business plan on how they could make a profit.

The market peaked in March of 2000 and trended sideways for about a month.  What is little know is that there was a "flash crash" that took place in the market on April 4th, 2000.  The NASDAQ crashed 15% in a single day before recovering most of its losses that afternoon.

Our stock market peaked in April of 2010 and trended sideways for about a month.  What is very well known is that there was a "flash crash" that took place in the market on May 6th, 2010.  The S and P 500 crashed over a 15 minute span before recovering most of its losses that afternoon.

The important question is, "what happened to the NASDAQ after this similar occurrence, and how close does that relate to our market today?"

The following shows the NASDAQ chart 4.5 months after the flash crash:















The following shows the S and P 500 chart 4.5 months after the flash crash:















The following over lays the NASDAQ with the stock market today, and the pink line continues with what happened to the NASDAQ moving forward:













The chart from the great depression which I have covered in the past correlates even better, but I wanted to show this lesser known chart pattern.

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