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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: HairBall who wrote (67394)	1/21/2001 11:37:03 AM
From: KymarFye	Read Replies (1) \| Respond to of 99985

All worth keeping in mind, LG, and strongly suggests that forms of manipulation do exist in the stock market, but our impolite contributor and I, in taking the "anti-manipulation" side of the debate, were entirely willing to concede that the kinds of fraud and other criminal behaviors described in some of your links exist. The main question isn't whether groups of market makers or insiders or criminal rings of outsiders engage in illegal behavior from time to time, or whether market makers run stops when they can (wouldn't you?) or whether large players may "paint" prices (wouldn't you?) or whether other players may on occasion "flash" orders they do not intend to have executed (whether or not the tactic is a dubious one) and so on - it's whether very widely followed and heavily traded stocks or, indeed, the major indices and the market as a whole, are so pervaded by "manipulation" that the only way to play the game is to presume that it's "rigged." Distinctions might also be drawn between strong, less strong, and trivially weak forms of rigging: Some believe that the "big boys" are totally in control virtually at all times, and are running the market as a gigantic conspiratorial scam. Others believe that at least at critical moments, they can run the whole market up or down, depending on their positions at the moment. Others believe that they exercise their power most aggressively on individual issues, presumably with the intent to deceive and ruin naive investors and small traders (wouldn't you? - that is, if a small trader climbs on a spiking stock along with the rest of the herd and sells at the top, or shorts into strength and covers on the collapse, it's considered skill; if a big player does it, accusations of unfairness and manipulation arise.) Then there are the well-known instances of analysts giving recommendations counter to their firms actual positions (and actions) on a give stock - a practice that to my mind needs to be exposed whenever possible, but which I would still call weak, if only because the reputation of the analyst community as a whole has fallen so low in recent months and years. From time immemorial, "let the buyer beware" has been the first rule for any participant in any market to keep in mind. Some believe all of these things occur, some believe that some of them occur, some believe that, for the most part, the "strong" forms of manipulation merely seem to occur, but usually because the effects attributed to them were very likely to occur anyway, or because the intentions seen to be behind them coincide with other already-present objectives and impulses. I think of the absurdity of tech investors blaming Abby Joseph Cohen for the March - April events (she was accused of being the front-person for Goldman's devious manipulation scheme), when by now everyone likes to pretend that he or she knew the crash was inevitable and unavoidable. The other example, of the Nasdaq closing at 1492 before the Columbus Day weekend likewise says nothing about some criminal conspiracy. Anyone who follows the market closely has seen how trading in the aggregate can cause the price action of the entire index to hone in on a given price level with surprising exactitude. The given level appears to be on "everyone"'s mind, and trading accelerates towards it, hovers around it, and so on. It doesn't mean that there's a man behind the curtain pushing a lever, except perhaps in the sense of my previous post regarding the kind of immanent intelligence associated with complex selective systems of all kinds. For me the central issue remains whether any of these perceptions or perspectives can uniquely contribute to a more effective trading practice. That 30 market makers cheated or that eight brokers pumped stocks for $11.1 MM in ill-gotten gains, or, more helpfully but not exactly big news, that big players have to scale in and out of positions on small but fast-moving stocks doesn't support the contention that the whole thing amounts to a criminal enterprise and must be treated as such.