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To: UnBelievable who wrote (28425)10/15/2000 5:46:51 PM
From: GraceZ  Read Replies (1) of 436258
 
It is a real testament to the skill of the MM's that they are able to achieve very large price gains with negative money flow without any sustained periods of price decline.

This is totally false. MM skill has nothing to do with it. Why would a marker maker care whether a stock went up or down when they make money in either direction? They simply get on the other side of the public action in a continuous market. MMs are only involved in the event of a discontinuous market.

If you have looked at as many money flow charts as I have in the last year you would see that money flow is frequently negative as stock price rises and can stay that way for long periods of time before the price follows it down. Conversely, a decline in the stock price can occur even though the money flow is decidedly positive and accelerating as the price bottoms.

The reason is apparent if you separate out sizes and measure the money flow on different size orders. The block buying 10k or larger almost always determines the money flow, while the small sizes 100 share orders almost always determine the price. Notice I say almost always, there are exceptions. You can't see these things unless you separate money flow into order sizes. When money flow fails to keep up with rising price on the way up, professionals see this as the time to start their exit and sell into public speculation. Conversely, they buy into the public dumping.

It makes sense if you consider how price sensitive an institution buying 100k shares would be as compared to a small investor buying a hundred shares.
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