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business newsWas the Flash Crash Apple's Fault? Part 2
One minute charts provide more evidence that Apple is relevant to the May 6 flash crash.
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Relative strength measured by ratio analysis on one-minute charts provides a surprising level of detail about the flash crash that can't otherwise be interpreted. I believe that this innovative use of ratio analysis is critical to understanding the compressed events of the flash crash.
Here's a chart of the NASDAQ-100 index, Apple (AAPL), and the relative strength (ratio analysis) of Apple to the NASDAQ-100 on a one-minute chart in the moments leading up to, and during, the flash crash. What ratio analysis shows is that at 2:44 p.m. on May 6, 2010, Apple spiked down hard relative to the index itself. In other words, Apple was much weaker than the index during the flash crash, or conversely, much stronger to the downside than the index.
In Was the Flash Crash Apple’s Fault? I showed that the NASDAQ-100 was the weakest link during the flash crash and that Apple represents 20% of the weighting of the NASDAQ-100. Adding this chart to the evidence I presented in that article, it's not a stretch to logically interpret that Apple pulled the index down with it, rather than vice versa.
One-Minute Chart
Click to enlarge
In contrast, look at this chart that depicts the relationship of iShares Russell 2000 Index (IWM), the number-one broken ETF during the flash crash (by trades and volume), to the NASDAQ-100 on a relative strength basis. During the same pivotal moment of the crash, IWM spikes higher, confirming that the NASDAQ-100 on a relative basis spikes lower at that moment. This clearly elucidates that despite the large number of broken ETFs during the flash crash (69% of all broken stocks), ETFs were a victim of the crash rather than the cause.
One-Minute Chart
Click to enlarge
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