Two items for this morning.. "“Individual investors placed a greater emphasis on return of capital last month because of the volatility in the stock markets. The movement of portfolio dollars out of equities and into bonds/bond funds and cash corresponds with the latest AAII Sentiment Survey, which showed bearish sentiment at 50.9%, the highest level of pessimism recorded since November 5, 2009. (Bearish sentiment is the expectation that stock prices will fall over the next six months.)”"

Are small investors popping smoke and leaving the stock market?

It's worth going back and reviewing this article on what likely caused the flash crash of early May:

"According to this Wikipedia article on quantitative trading strategies, HFT recently accounted for more than 70% of all trading volume on US stock exchanges. Does it matter when these firms stop trading and pull all their bids? You bet it does."

Dress Rehearsal for fully automated crash.. Flash Crash revisited

Pretty frightening prospect to know when you're buying a stock you're trading against computers who can pull the rug out from under the market for your company's shares in a split second.

It's apparent the markets are not so much about human decisions regarding "price discovery" in assessing the fair market value of a particular asset. Computers are making these decisions and they are non-emotional, calculating devices. So essentially people are just feeding money into these digital trading systems, systems that can quickly manipulate prices for a stock with the flip of a switch.

Little wonder that investors saw the "flash crash" as a sign that the market is rigged against them and have decided to seek safer havens. And certainly that decision has been influenced by the tremendous event risk I spoke of in my previous post.

Scrutinizer