Very interesting, Ally. Sometimes I wish I didn't have a day job, so I could sit and read the tape like that. The scenario you describe sounds very plausible. Many people talk about manipulation by the market makers, but usually they assume they are trying to move the stock consistently in a certain direction, rather than playing both sides of the trade. I don't have level 2 (yes, you are talking to an amateur!) but I have often heard about large blocks crossed by one firm, as you describe. I always assumed there were different buyers and sellers behind the scenes, but what you say puts things in a different light. I like to use On-Balance-Volume as an indicator, but that kind of trading would ruin its value. There might be millions and millions of shares traded at higher and higher prices, but that doesn't mean anybody's buying. It could be just one firm selling the same set of shares to itself over and over! It's hard to believe that's legal, but maybe it is. (Anybody know?) I guess when they put their buy and sell orders out there would be a risk of other players stepping in at that moment, but if the other players could not afford to trade large volumes, it might not be much of a risk, and of course the orders would only be out for a moment before they were filled.
By the way, is your name Ally as in Ally McBeal, or is it the word "ally", meaning a friend or partner?
Fun-da-Mental |
