Here is a great article relating to this Muriel Siebert quote, written by Greg Capra at Pristine - spot-on, pointing out what typical anti-trader baloney it is. It's copyrighted, so I post it here with permission from our trading friends at Pristine.
-Steve
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PRISTINE CHART OF THE WEEK - WEEK OF 8/23/99
Chart can be viewed online at: pristine.com
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Muriel Siebert, chairman of the discount brokerage firm that carries
her name, expressed outrage over a similar zest for her company's
shares last April. When recommended in a popular chat room, the
stock catapulted from just over $19 to about $70. It closed Friday at
$18.875.
"There's a lack of accountability in these chat rooms, and it's
necessary for the regulators to do something if these people move
individual stocks," Ms. Siebert said. "If the regulators want me to lead
a parade against some of the things going on, I would do it." People
approach her on the street, she said, describing their anger over
paying $70 for a stock that has now returned to a more reasonable
level.
Securities regulators as a matter of course do not comment on
investigations into suspicious movements in stocks.
PRISTINE COMMENTS
Stocks in the same sector will often display very similar chart
patterns. Institutions and traders react to bullish or bearish news
about that sector causing them to move in unison. We can see this
clearly by overlaying the charts of these companies on top of each
other. This weekend Muriel Siebert, chairman of Siebert Financial
Corporation (SIEB), leads readers of the NY Times to believe an
internet chat room caused the shares her company's stock to move
from $19.00 to $70.00 last April (Actually, the $70.00 high was hit in
February). She tries to put blame for the abnormal run up in price
and subsequent drop on chat rooms. This sounds like an attempt to
transfer heat from angry shareholders mentioned in the article to the
new whipping boys of Wall Street, "Day Traders". A quick, cursory
look at a few charts in the brokerage sector will clearly show that
Mrs. Siebert theory does not hold much validity.
The true cause for the run up and collapse in SIEB is neither the fault
of Siebert Financial, nor is it the fault of Internet chat rooms. The
speed at which information is dispersed has changed for sure. The
Internet now enables virtually anyone access to breaking news,
leveling the playing field between institutions, traders and investors.
This dynamic does shorten the amount of time in which all can react,
at times causing exaggerated moves. I for one am grateful for the
leveling of the playing field. The "old" Wall Street, on the other hand,
is likely wishing it still had that edge.
As chartists we always look for the truth in the charts, not in the
news. Once news on a particular stock is out, we look to the chart of
that stock to find out what the truth is. As we have always told our
subscribers, charts don't lie. The charts shown above of J. B. Oxford
(JBOH) and M. H. Meyerson & Co (MHMY) clearly show how they
followed the same pattern as Siebert Financial (SIEB), day by day.
My question is, "Did these 'evil' chat rooms cause abnormal moves in
all these stocks also?" Of course not. The charts shown above
indicate that this was a sector move, driven by large institutions vying
for position in the on-line brokers. A further look will reveal similar
patterns in Southwest Securities (SWS) and E Trade (EGRP). Unlike
the others, these two stocks moved to new highs after February,
indicating their leadership in the group. Again, "Did chat rooms push
these two heavy weights to new highs too?" "Or were the
fundamentals of these companies just a bit better at the time?"
Needless to say, I think the latter is the case. In any event, all of
these stocks are currently at, or below, their February levels. And at
the time of this writing, they are starting to show some signs of
stabilizing.
The next time you read about the next great stock in the paper, hear
an analyst upgrade, or an earnings report that beats estimates, my
advise is to check that chart and the charts of companies in that
sector. If you find that they have been moving up strongly prior to the
news release, it's likely the effect of the news was already
anticipated. If the effect of the upcoming news is already reflected in
the stock, the odds of the stock dropping on the news is higher.
Failure to understand this concept causes far too many to buy the
day's high when a news item is positive.
While the playing field has been made more level, the "old" Wall
Street still does have an edge, simply because they control the news,
to a large extent. If Mrs. Siebert really wants to do something useful,
perhaps she should lead a parade against some of the dubious
brokerage upgrade/downgrade tactics and other longstanding news
tricks practiced by the very same industry that made her. There will
certainly be some bigger fish to fry there, as opposed to the small
ones found in chat rooms like ours.
Careful though Mrs. Siebert. The big ones fight back harder.
Greg Capra
Pristine.com
www.pristine.com
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