Securities Research Services

Friday, April 20, 2007

Was China a non Event this Time?

Yesterday the US markets averted a crash. The Chinese bump in the road thus far appears to be a non event this time around.

Have traders learned their lesson as they note that last February's crash was followed up buy steady buying? Or, could the answer be a bit more sinister? That is, could expiration day have prices pinned?

We won't know until next week, but we suspect there is a good chance that prices are indeed pinned. Options sellers have a great deal to lose today if the market takes a dump, so perhaps they used some resources yesterday to buy the dip, which in turn caused the crowd to follow.

It's a fine sounding conspiracy anyway.

Yesterday's positive day was the second positive day in a row where indices were positive and market breadth was severely negative. This is a warning that this market doesn't have much of a floor under it.

When markets move up on terrible volume and decreasing breadth, these are warning signs that should well be heeded.

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