By Nicholas Santiago on September 28th, 2010 10:06am Eastern Time
The stock market has become much like the old wild west. Yesterday Progress Energy Inc. (NYSE:PGN) traded from $44.00 to $4.00 in a few seconds as the newly implemented circuit breaker failed to stop the flash decline correctly. This morning Apple Inc.(NASDAQ:AAPL) declined by about 15 points as the stock opened at $291.71 and dropped to $275.00 in a minute or so before bouncing back higher by over 10 points. A couple of weeks ago Cisco Systems Inc.(NASDAQ:CSCO) was halted after it triggered the circuit breaker from a quick 10 percent decline. Traders and investors have really no choice but to wonder what is going on in the markets, what is causing all of these erratic moves. Let us not forget the huge decline on May 6, 2010 which is now called the infamous "flash crash." These are not normal moves for the stock market.
The volume is also another factor to be very suspicious of. Besides the volume being very light as of late it seems to increase when the stock market declines. However, the stock market will continually rally on extremely light volume. Historically, this is not how a healthy stock market behaves. A healthy stock rallies on stronger volume and declines on weaker volume. At least that is the way it has been since the start of the New York Stock Exchange.
So what is really going on with this market? That is a great question that many are asking. 2010 has been a very volatile and choppy year. This market is only for traders and not for the buy and hold investor. Who could really hold a stock when it may decline or even crash before bouncing? Welcome to the new wild west as this looks to be the way the stock market is for the time being.
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