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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: TradeOfTheDay who wrote (13314)	7/28/1998 8:47:00 PM
From: Robert Graham	Read Replies (3) \| Respond to of 42787

I did not think of the margin call angle. Interesting thought. I have seen this happen too many times myself where "out of nowhere" the market reverses and takes direction and manages to close just above a very important support right before the end of the day. This ends up stemming the sell off for a period of time, and in some cases that market was able to recover from the sell off where its recovery started the next day. This happens a bit too much to be just odds. I just never was able to figure out how much of this was explicit manipulation, and if manipulation was involved, how it was pulled off. I remember that one day a while back here on SI when I was closely looking at the program trading that went on during the trading day. This is where I started to see patterns to the program trades that were initiated during the day. I was evidence of explicit intent behind the timing and direction of the program trade. If well-placed, the market would respond be continuing in the same direction of the program trade. After the market traveled enough in one direction, which may have involved another program trade to help it along there, then the S&P Futures would immediately be managed to lock in the profits. Apparently the institutions leg into their spread between the S&P and the Futures in this way. So when I saw the sudden and appropriate change in the value of the Futures, I knew that the institution was locking in their profits now that the market has moved far enough in the desired direction. At first I thought I was "overdoing" my analysis even though this all made sense to me. Then I ran across a book that had a chapter written by a program trader of an institution. Here is where he talked about the evolution of program trading, its uses, and in order to maximize profits how they now leg into the arbitage spread between the S&P and the Futures starting with the program trade first. Now why would they leg into it? Well, of course! That is what I have been seeing! To maximize profits generated by the program trade itself by allowing the market to follow through before locking the profits in. Why else would time be to their advantage in such a situation? So is it such a big step to go from the use of program trades to impact the market to the profit advantage of an institution, to using program trades to take advantage of an opportunity to move a market up so it can close at a more advantageous place at the end of the day? I do not think so. Of course it is not 100% foolproof for the institutions. And the market may not make an opportunity available to them for this. But it looks like it can happen. And if it can happen, it will when it is advantageous to the institution performing the program trade. I will need to be looking for program trades after a couple days of market sell off so I can confirm my theory over time. Bob Graham