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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (21493)	7/11/1998 1:29:00 PM
From: HairBall	Respond to of 94695

Haim, when your right, your right! Regards, LG

To: Haim R. Branisteanu who wrote (21493)	7/11/1998 4:47:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 94695

I think you are referring not to the specialist of NYSE, but the NASDAQ MM. I will repeat that 70% of all transactions on the NYSE does not go through the specialist, including retail orders. Also the specialists on the NYSE do not handle institution orders. However, the NASDAQ MM is allowed to perform this function and the NASDAQ MMs are in the position to manipulate prices since most retail orders go through them as you claim happens with the NYSE specialist. So this is why I say that in many if not most cases the specialist does not have the opportunity to manipulate stock prices except in certain situations like that of illiquid stock. A specialist is different than a NASDAQ MM which is also different than a futures market MM. Each performs their function in a different environment and functions in a different way to support their liquidity function in the markets, and yes, to make money for themselves. It is a very good idea to understand these differences. As far as Richard Ney is concerned, I think he has made some valuable observations about the market. However, making worthwhile observations and being able to understand what is making the observed event happen "behind the scenes" can be two different things. Much of the time what Richard Ney observes as manipulation is IMO actually normal occurances for the type of market and its players that is under observation. Some of the items that were related to me by my father in his reading of Ney's book which I was able to explain as examples of what I find to be regular phenomena in the market that I have come to understand which does not involve manipulation. One thing Richard Ney does not consider is the ability for traders and specialists alike to do what is in their best interest. The more money the trader has at stake, the more apparent the pursuit of their best interest will become to the other market players. This is different but needless to say can be related to "manipulation" by the specialist or trader. However in a given case, this does not mean what we are seeing is "manipulation". I will give a very simple example here that will make this clear. Lets say you are an institution with $20 Billion or more dollars to manage, like one of the many mutual funds of Fido. Now how would you go about entering and exiting the market with this amount of money? Obviously very carefully. Would you pay up for a stock when the stock is in the middle of a good, strong trend? Or would you accumulate the stock before a breakout and the strong trend unfolds? How would this show up on the chart of the stock? Would you sell when everyone else is selling? Or would you sell into strength, like when the uptrend is still showing strength? How would this show up on the chart of the stock? Would you buy on good news that comes out about a company? Or would it be more intelligent to sell on the good news when looking for an exit? Remember that entries and exits by mutual funds need to take place over a period of time. How would this show up on the chart of the stock? When you found that your sales are impacting the price of the stock, which is possible for this size of money, would you continue selling or wait for the stock to recover to its former price? If a stock breaks out while you are accumulating the stock, do you chase it up, leave it, or chase it up to a predefined price target so you can place as much of the money you can that has been allocated to that stock for the portfolio? How would the above exit and entries by large money interest show up on the chart? I will note here that the accumulation efforts of funds can actually help facilitate the breakout and in some cases accelerate the breakout in progress as the funds are jumping over themselves to palce the remaining part of their allocation to the stock. This is what happened with CPQ earlier in the market adjustment where I saw multiple 20,000 and 50,000 and 100,000 and 200,000 and 500,000, and 800,000 share blocks all in a short time frame move into the stock that had already exploded upwards which just managed to acelerate the breakout. Each example above which has been framed as a question is how fund activity can be shown to impact the price of a stock. Actually they have to work hard to minimize their impact on stock. As you see, where the institutional money goes the market will go. This is a fact of life when there is much money involved. By working as a group as in their regular rotations, the impact of fund money on the market is magnified where the funds can and do have a significant short term impact on the market. Remember that money held by institutions represent over $2.5 TRILLION dollars in holdings that are moved about in the marketplace. Look at what has happened to the Internet stocks. After purchasing them for window dressing, they began to unload them. The funds will cause certain patterns in the market that is not manipulation, but a direct outcome of their attempts to intelligently trade and take their profits in stock where there are large amounts of money at stake. This is not manipulation by the specialist either. Anytime there is large money at stake, this large player will leave their footprints in the market. Their goal is to leave as little of a footprint as possible which is just the big player operating in their best interest. But as we see this goal in note entirely possible and can become very obvious at times. This is definitely NOT manipulation, but large money interests free to pursue their best interests by acting in an intelligent way to manage their positions in the stock market. So guess who the player is more likely to be that can produce noticeable patterns in stocks and the market itself as it shows up on teh indices? Not the specialist. If anyone, it is likely to be the institution. IMO this is where Ney has had it wrong in many of his expositions of market behavior that you can find in his books. Bob Graham