(Originally written in 2003)
Sudden spikes or reversals often are the result of a rumor or news.
Today after the market had sold off initially and was slowly consolidating near its low it spiked up suddenly.
A piece of news that the Department of Homeland Security was considering lowering the terrorism threat level (somewhat earlier than expected by the mainstream press) came out and was then shortly thereafter discussed on a common trading news site : Briefing.com.
In many of these cases you get a reaction that is in stages. You get a strong push up followed by 1 or two further pushes as the news gets more and more broadly known.
In the case where it is a rumor, a denial of the rumor by an official or credible source also widely disseminated will often result in either a quick reversal in the other direction or no further spike.
News tends to move the markets in three spikes, rumors that become verified do also as more and more participants buy or sell the information. Finally a false rumor or false news reaction will stall or return to the original levels it traded at before the rumor became circulated.
