The heart of the fear surrounding the 15% plunge in Thailand’s shares is captured in one word: contagion.
Hedge funds have increasingly loaded up on risky derivatives in recent years, which can maximize returns — and losses. Hedge funds struggling to meet margin calls in suddenly plunging Thai shares may be unable to unload their holdings in Thailand amid the rush for the exits, and are forced to sell more liquid, or easily traded, shares held in other countries. That could be one reason why Japanese, Indian and European stocks swiftly followed Thailand’s decline Tuesday.
12/19/2006
Pilot fish
Some days ago, I linked to the Bombay Sensex tumble and talked about another market acting as pilot fish for impending move in another market. Look at the Asian markets today. Thailand (like it did last time), precipitated the crisis and now the market across the region had highly volatile day. So much for diversifying by geography, when one market catches flue, it just spreads. So it helps keeping an eye on abnormal action or aberration in other markets and sectors besides the one you trade.
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3 comments:
this is a market time when i think charting is very helpful - for timing short sales, for setting stops, etc.
for a top we would be looking for lower lows and lower highs, high vol days where the stocks goes nowhere or goes down, or stocks go up on very low volume
if you think about it, stock scans and pattern recognition on charts can be made to be mathematical equivalents - expressions of the exact same underlying phenomena
aapl got big support at its MA50
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