Market Crash Alert

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by Chris
The US equity markets are declining hard right now…if we can call -2% to -2.5%  “hard.”

But there’s a distinct crash possibility lurking here.  With the computers MIA, there’s practically no volume there to catch this thing…
Meanwhile VIX is spiking:

Crashes happen when all the bids get pulled.
The problem with today’s “”markets”” – which have been allowed if not encouraged by “regulators” to become playpens for algorithms – is that when things get wonky the computers simply stop trading and all of their apparent liquidity goes away.
Low volume = high volatility.
Look at this chart by Erik Hunsader of Nanex:

First notice the flash crash of May 2010 in the orange-ish line up top.  When the flash crash happened all the bids got pulled and there was nobody there to buy.  So the market crashed.
Next look at the volumes in play for Monday, the -1,175 point Down drop…abysmal!  Spooked on Friday, the machines didn’t show up for work on Monday.
Then the “Tuesday Rescue” had even worse volume!  Unbelievable!  Bad juju right there.
A crash will happen when the big institutional cash-market players decide it’s time to “lighten up” and there’s nobody there to sell to because all the computers are MIA.
That’s the working theory I have at this time.
Time to buckle up, folks.

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