The Butterfly Effect
In chaos theory, the butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state.
So just as the flapping of the wings of a butterfly in Brazil can influence the formation of a hurricane in Florida, an event as seemingly minor as a Portuguese bank defaulting on its creditors can trigger a generalized global indices selloff.
We live in an inter-connected world, where everything matters, and the ripple effects of small waves crashing around the world should be closely monitored. Every large market move starts with an intraday trend somewhere.
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