Waiting for the big Kahuna Message Board

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Strategies & Market Trends : Waiting for the big Kahuna

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To: HairBall who wrote (21502)	7/11/1998 5:57:00 PM
From: Robert Graham	Read Replies (1) of 94695

The large blocks that I mentioned with CPQ was followed by an increase in price with the breakout continuing. Also do not forget that many of those larger blocks are crossed transactions. This means that two sides got together and negotiated a price for the large block and perhaps conditions for further large block business between this buyer and seller. This is activity that happens OUTSIDE of the normal supply and demand action of the market. This is why you can see a large block transacted in a relatively quite and even thinly traded stock and the stock price does NOT go up accordingly, even momentarily except to log the transaction. This is IMO also why many large blocks can transact at the same price in this "artificial" out-of-band type of arrangement and have no direct impact on the price of the stock. It does pay to understand order flow and how orders can be transacted. Without this knowledge, the stock market would indeed look to be a mystery that would lend itself to the suspicion of manipulation. For instance, how many time have you placed a order that from retrospect was well-timed just to find that the limit order did not transact or you received a poor fill? This is normal and not the result of manipulation. Actually it is an indication to the experienced trader that their timing for the trade was good. For instance, during a breakout under volume, what trader would be found to be selling? The buyer would get a poor fill in this situation. This is normal supply and demand at the order fill level. Furthermore, the remaining traders who are selling into the breakout would participate in this process by allowing the price to be bid up before relinquishing their stock. Both buyer and seller are not working to your advantage in this situation. This has nothing to do with manipulation. But you will end up with a bad fill if your timing of market events is good, and I would not be surprised to find many traders in this position screaming "manipulation". I do respect your views and am not attempting to invalidate you as a person. I just find much evidence to the contrary of your opinion. I do agree that there is manipulation out there, and yes, even by the specialist. But I suspect what many think of as manipulation is not manipulation at all. IMO much of this evidence brought out by those who suspect broad manipulation of the markets is not the result of manipulation but actually is an outcome of market players pursuing their best interest in what can be considered the normal activity of the market. I want you to know that I still have been enjoying our exchange. It is always good to be motivated into keeping myself thinking about what I already think I understand. Less mistakes are made on my part when this happens. Bob Graham

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