Wall Street Cyber Terror Attack?

In all my years in this business, never have I witnessed what took place last week and it begs the question, What really happened?

Were we attacked through the various electronic exchanges that exist today?

Since we still haven't received any answers and given the fact we have been attacked lately in a traditional terrorist sense, this has to be considered since it is unlikely that true sellers were panicking out of their positions to cause a 1000 point selloff in 5 minutes only to change their minds in a flash and bring the indexes back up just as fast.
I also have to be skeptical about the dismissal this week by homeland security officials about this possibility.

I mean if it were true, do you really think they would admit this? If they did, what would happen to the markets if people thought their investments could possibly get wiped out by an enemy combatant.

All the signs are there in terms of the label "targeted attack".
For example, 2 stocks with the biggest index weighting of the Dow Jones were taken down to have the most impact on the index value. Also, Accenture, a company engaged in IT consulting and security systems for the financial markets in particular was taken down to a price of $0.

This is a scary thought, I admit but former security officials like Richard Clark have been warning of this for the last several years and since I have never seen selloffs of this magnitude in such a short time frame without explanation, then we must consider the future possibilities that an all electronic trading system without the benefit of the former specialist trading curbs and a reinstatement of the uptick rule for shorting will raise the likelihood that it will happen again.

As a result of the event, several thousand trades were cancelled by the exchanges and there are no disclosures of whose trades were cancelled, why those particular trades were cancelled, and finally which I think is the most important question, Is who made the most off this event as well as who got wiped out.

All this tells me that the public is not getting the truth because these things can be traced in terms of actual trading executions unless these records were also erased or covered up.

So be careful how you proceed until there are actual answers.

Timing of the January Effect

History has taught us that the first week of January many times can give us an indication of how the market will perform for the year. This is known as the January Effect

There are many schools of thought behind this investment theory but probably the main engine for this type of forecasting logic, is that fund managers and investors take new positions after clearing out other positions at the end of the prior year for tax loss and performance reporting purposes.

For purposes of this post, we will take a look at a daily chart of the ETF, (DIA), which tracks the performance of the Dow Jones Industrial Average. The basic indicators shown are the 50 and 200 Day Moving Averages, along with a linear regression channel set at 1 and 2 standard deviations, and finally a trend line drawn from the November low. The reason for looking at the ETF is that we can get a better sense of volume levels as displayed along the bottom.

As displayed in the chart, we can see the Dow is at a major resistance level as marked at 90.82, Representing the December high and January 1st, yesterday’s action. This resistance is also marked by the upper band of the one standard deviation linear regression channel.

Another healthy sign is that the Dow broke through the 50 Day Moving Average from the November low and this is a level we have not seen for the last several months.

We are at key 30 day resistance level and today’s market action at one point gave up half the prior day’s gains. Certainly if we can take out that level in the next three days, than the January effect theory would be forecasting a healthy 2009 for investors.

What I believe makes this year different for this January barometer from a timing perspective, is the massacre selloff we experienced in the last few months as well as the realization this bear market has lasted almost 14 months which is a little more than the average time for bear markets but certainly a better opportunity to invest for a higher market later this year .

I see this market rising over the next few weeks as weaker earnings seem to have already been priced in the market and the new administration takes office giving us a clearer picture of the plan to get our economy moving again.

For a better Video Presentation of this post please visit

www.traderxtreme.com

Past performance is no guarantee of future results.