The so-called "Flash Crash" of May 2010 was caused by a massive sell-off of stocks that snowballed quickly due to the many computer trading programs that are used by all of the major trading firms. These programs have algorithms that have set prices to sell and buy. What this means practically is that the computers are ultimately making the trades in fraction of seconds, and when a programmed set price is reached for selling, a snowball effect can happen. The precipitous reaction to the sell off early in the day indicates that the plunge protection team (PPT) is working overtime to prevent a collapse of the stock market.

Essentially, you are asking a two part question.

First, "Flash Crashes" are big drops in a stock price that happen very quickly. What makes them a "flash" is that the stock recovers its original price very quickly, often in the very same day. The one from May, 2010 started with a very large trade to sell 75,000 contracts of the E-mini S&P index (think bigger than $4Billion in a single trade). The stock market works on an auction system. When there were not enough buyers to cover the demand to sell, the computers began filling the trade at lower and lower prices. Since it was computer based, you can imagine this happened very, very quickly. Other me-too traders jumped on the band wagon and pushed things even lower. Things recovered once other investors saw an opportunity and jumped in with orders to buy.

Second, The Fed's "liquidity boosting measures" basically amount to simply printing money. Once they print it, the Fed lets the banks borrow this money at almost 0% interest. The banks take the money and invest it. They hope to earn more interest on the money than they have to pay. Bernanke's hope was that the banks would invest the money in home and small business lending. Unfortunately, most of this money is going into the stock market.

The analysts are nervous because they feel that these "flash crashes" you mentioned are a sign that the market system must be broken. There is also the fear that since the banks are investing with borrowed money, stock prices might be over-inflated.