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Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: KHS who wrote (265)	7/30/2000 1:37:04 PM
From: gene_the_mm	Read Replies (1) \| Respond to of 1426

REGARDING STOCKS GAPPED UP OR DOWN AFTER NEWS... Keith... Great question. I actually wonder about this myself. All I can tell you is that stocks tend to 'find a level'. When MM's come in the day after news and see that they have LARGE amounts of orders to sell the stock (panic sellers based on the news), the MM's are involved what is loosely called 'price discovery'. This is where the buyers and selllers are trying to find a fair level to price an issue (this same phenomenon also takes place in IPO's on their first day). All this is is the stock 'finding a level' to trade. In most of the big-cap stocks, there is no single MM that could 'set' the price level. What happens is the stock finds a level of cumulative 'equilibrium' between the mass of buyers and sellers. There is honestly no other way to describe this 'price level finding' except through MASS PSYCHOLOGY and the "Efficient Market Theory" (which I have become more of an advocate in). Many times big institutions trading in the after-hours will determine what they feel is a 'fair value' to the stock based on the announcement (in other words recalculate growth rates and P/E's based on what is being said). These institutions then trade based on those calculations and many times they are very accurate assessments of where the stock will open the next day (but not always!). Hope that helps, -- Gene