Basically we have a very algo (algorithmic) trading environment at the moment, mostly stocks. Everyone has there different views on 'flash trading' but the overall agreement is that the 'algo' trades crashed the Dow on the 6th May 2010, sending it from 10,879 to 9,869 (998 points) within minutes. The reasons? Foggy, not much has come out since Algorithmic trading (computer trades) are very secretive and hard to investigate. So the market rumour? Apparently the algo trades freaked on the decent of the EUR, panicked (can computers panic? obviously they did...much like a human response with trades, cept it was a brutal panic) and cut their longs to short in seconds, thus decimating the value of stocks in the process. A contagion based computer 'freakout' via a collapsing EUR (at the time)
refer to chart EUR open@1.28m low@1.25, DOW high@10879 close@9869 (6th May 2010)
Now, if the theory for the (precursor) flash crash was a run on the EUR as shorters starting hitting the currency hard. Could the same happen when the Japanese Yen (YEN)? If the YEN (v's USD) slams through it's historic low of 85.00 (15yrs) and the Bank of Japan don't intervene and short sellers start selling the USD adding strength to the YEN; If the US sells on a terrible unemployment number (6th Aug 2010) the YEN should shoot through the 85.15 support. Thanks to USD carry trades and short positions
Could this 'freak' out the computers (algo's)? Possible.
JPY:
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