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Strategies & Market Trends : Analysis Class for Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Arthur Tang who wrote (1172)	10/11/2000 6:24:05 AM
From: Arthur Tang	Read Replies (1) \| Respond to of 1471

As many a time as we experienced tax loss season; we have always jitters in our stomach fearing the market makers overdoing their pull backs. Pull back forced investors to dump and a crash becomes inevitable. In 1987, the Feds had to step in at the peak hours of dumping; and ask Merrill Lynch to do clearance of the stocks traded. At the end a total cost of $1.5 billion supplied by the FEDs calmed down the dumping sentiments. However two specialists went bankrupt in the 1987 crash. In 1988 on October 1, President George Bush was advised to have Greenspan have $1.5 billion ready at the NY overnight discount window. Wall street knowing that had no panic. Since then each year was like a tradition; money was ready. Since 1998, the amount was increased from $6 billion to this year's $10 billion. When will the pull back stop, in this October? About the 17th, as always; one would say. It is always that when oversold happens and before cash is exhausted. Cash is tied up by shorts. Cash is released when shorts are bought back. So, before shorts are done, nice moves had to be instituted to prevent a crash. It sounds simple, and it is. But the problem is, not all shorts are recovered. Some market makers have no shorts and their customers dumped. Some market makers have shorts and could not buy back because they have strong hands as customers holding on tight. This all means some market makers will be squeezed and even go out of business. So, October is difficult for all investors. On the other hand, some market makers having no more shorts, will have nice moves on oversold condition saving us from a crash. How to survive? Scalp the market makers, averaging down? That is what the professionals do. But for small stockholders, re-examination of fundamentals then hold the good stocks; otherwise be nimble to sell for tax loss and wait to buy back the questionable stocks to reap on the January effect have always worked. Good luck on all your investments.