Free Trades

Prop Desk Crooks Take an Unscheduled Breather

It is neither bulls nor bears who move the markets, but crooks, mostly. Spectacular but fleeting rallies draw nearly all of their buying power from panicky short covering that is easily triggered and deftly harvested. I have previously discussed this phenomenon, which is most visible when stocks take unseemly leaps at the opening bell. Although few shares will have changed hands in the gaps this creates on charts, it effectively fattens the bank accounts of everyone who held stock before the leap.

How do the thieves (aka ‘broad-tossers’; see photo above) who control the markets do this trick? First, in order to deplete sellers, they pull their bids in the wee hours of the morning. When there is no news of special interest, stocks will tend to drift lower, especially if there are no significant buyers on the way down. The trend will begin to feed on itself as shareholders grow uneasy. If Wall Street’s Wharton-educated crooks have orchestrated the heist properly, a selling crescendo will cause stocks to bottom about 30 to 60 minutes before the start of the regular session.

Then, with sellers exhausted and no offers in sight, it is bears who will start to grow anxious.  Their increasingly urgent bids to close out short positions will continue to accumulate as the opening approaches. It is then that the Masters of the Universe, mainly specialists licensed to maintain orderly markets, but also to steal from amateurs, will spring the trap, pulling their offers to reset prices to a level that can satisfy pent-up demand. That price will often be well above the previous day’s close. Voila! Instant new $$ billions for the white-collar carnies who operate the world’s bourses.

 Why Stocks Idled

The foregoing helps explain why stocks did nothing on Friday. Until a few months ago, before the bull market sputtered out, Fridays were usually a celebratory day when bears were too scared to get in the way of the stampede. Lately, though, this has changed, since there is less bullish news to boost markets.  And even when the news is ostensibly good, such as the recent announcement of a cease-fire with Iran, there are sufficient doubts about the veracity of the headlines to dampen the enthusiasm of buyers.

Not that good news is necessary to send stocks soaring; the mere absence of bad news will usually suffice. Regardless, for the thimble-riggers, the idea is not to buy low and sell high on good-news days, but to slingshot stocks in both directions with such ferocity that entering and exiting at the intraday extremities is the quickest and surest way to rack up sensational gains.  Of course, it helps if you can see the order book, which is as good as a crystal ball for predicting exactly when buying or selling will dry up.

Card Mechanics

On Friday, exchange markets that typically grow feistier with the approach of the weekend traced out a brain-dead sine wave that would have suffocated any trader trying to leverage price swings. Headlines from a day earlier were starting to molder on the vine, mostly with ignorant speculation about who is winning the war.  That kind of non-news is hardly conducive to slingshotting stocks around, and so the supposed Masters of the Universe lay exposed for a few hours as the one-trick sleazeballs they are, unable to act when there was no news to turn the herd crazy.

Rick’s Picks nevertheless left subscribers with a moderately bullish bet designed to capture some of the ginned-up energy if the ass bandits should trigger off a short squeeze early this week. They have treated the war as a mere annoyance and are anxious to get back to business as usual. That means enriching themselves by jump-starting the flow of Other People’s Money into stocks. However, we seriously doubt they will achieve new record highs this time, so don’t get carried away if you have access to our strategy. And speaking of getting carried away, here’s a link to our latest interview with Howe Street’s Jim Goddard. This is not-ready-for-prime-time stuff that even the most brazen Fleet Street tabloid would think twice about publishing.  [The author was a market maker on the floor of the Pacific Stock Exchange for 12 years.]