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Politics : Ask Michael Burke
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To: BGR who wrote (55162)4/8/1999 4:46:00 PM
From: Mama Bear  Read Replies (1) of 132070
 
BGR, I find short term fluctuations to be more predictable for two reasons. Let me qualify this by saying there must be an orderly market being made, so it doesn't apply to the 'nutz and thinly traded small caps. Reason #1 is that unexpected events are very rare during the trading day. Companies strive and are encouraged to release news that will cause drastic fluctuations in price after trading hours. Reason #2 is because the market makers trade in their self interest. An example is a company that announces unexpected bad news off market hours. The market makers are required to buy all of the panic orders at market at 9:30 am. In their self interest, they bid a price that will bring the buyers out. Hence an almost clockwork 'dead cat bounce' that can be exploited by a short term trader willing to step up and help them out with their daunting task of buying all those shares. It works much the same throughout the day. A large seller of CSCO will show up with the stock at 118. A market maker agree to buy the stock for around 114. He then begins to short the stock to any who will buy the shares, working the stock progressively lower, until he has shorted the # of shares the large seller wishes to be rid of. The stock appears heavy, with relentless selling. Seeing the block cross finally at 114, buyers can step in. The advantage the mm has is that he knows this block is there, and the rest of us don't. It is a matter of supply and demand, in my opinion. Folks buy and sell stocks for a reason, not because of a flip of the coin.

Barb
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