MM & Price Action 101
Keep in mind:
1. The fewer the Market Makers making a market in a stock (LJLB has a relatively small # of MMs) and the more thinly traded the stock, the more the MMs can quite legally manipulate it. And they do so, while still providing a relatively free, balanced and fair market. The operative word is "relatively."
Of course, MMs no longer practice collusion and price fixing. Heaven forfend such onerous acts. But just 3 years ago, the SEC found collusion and price fixing to be rampant among NASDAQ Market Makers. Those MMs (many of the biggest and most "reputable" institutions in the business) were roundly prosecuted. They were slapped on the proverbial wrist by the SEC, given fairly hefty fines, and had to promise "...never to do it again."
2. Markets are Made. That means men and women organize and run them. 100% objectivity does not exist in them. If the markets were 100% objective, there would be no Market Makers on the NASDAQ, or Specialists on the NYSE, just computer terminals, and technicians to make sure the hardware worked efficiently. We are in fact moving toward greater objectivity in the markets. But we're not there yet, not by a long shot.
3. Case Study in Price Action, Market Maker manipulation, Volume, and Order Flow: CYBX is a classic case. Its price action on Mon, Tues, and Wed, 4/3 - 4/5, should be required study-fare for anyone truly interested in what really happens in the market place. |
