Saturday, May 30, 2009

More on Friday's Close

A great post at Market Ticker on Friday's close. The post credits the move at the end of the day to either a forced liquidation of a short position or market manipulation. Market Ticker sides on the forced liquidation. I don't buy that. The market was no where all day and then the huge spike came in. What would have caused the margin call to start the forced liquidation if the market wasn't moving? Forced liquidation occur when the markets are moving against you. Obviously once the huge spike in volume came forcing the market up, forced liquidations added to schizo nature of the move but I can't see how it was the catalyst. It is possible that a big fund was in trouble say on Wednesday and the bank gave this fund until Friday for either a forced liquidation or supply more margin. The bank waited until the last 15 minutes before forcing the liquidation. I also don't think it had to be a conspiracy though it may be. I think there were other potential causes than just the two mentioned. A great write up. Check out the post.

Thanks goes to the comment board for bringing this to my attention.

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