If a specialist establishes a downtrend from a high today, he will begin to precipitate public selling tomorrow. Insider selling and short selling occurring at rally highs have a specific relationship to the forthcoming declines from rally highs. When investor's are buying, on balance, specialists are selling.
Descrição original:
Título original
Specialists How They Shade Traditional Thinking by Richard Ney
If a specialist establishes a downtrend from a high today, he will begin to precipitate public selling tomorrow. Insider selling and short selling occurring at rally highs have a specific relationship to the forthcoming declines from rally highs. When investor's are buying, on balance, specialists are selling.
Direitos autorais:
Attribution Non-Commercial (BY-NC)
Formatos disponíveis
Baixe no formato DOC, PDF, TXT ou leia online no Scribd
If a specialist establishes a downtrend from a high today, he will begin to precipitate public selling tomorrow. Insider selling and short selling occurring at rally highs have a specific relationship to the forthcoming declines from rally highs. When investor's are buying, on balance, specialists are selling.
Direitos autorais:
Attribution Non-Commercial (BY-NC)
Formatos disponíveis
Baixe no formato DOC, PDF, TXT ou leia online no Scribd
By now the reader of these articles is surely which will attempt to hide the fact that the aware that most investors are ruined in the overall market is declining sharply. On some market because of their failure to recognize days the Dow may close sharply higher while the causes of the market’s trends are due to a the preponderance of declines over advances succession of concrete and particular events, shows the market as a whole to be still all of which are linked to one another through disintegrating. the specialist as today is linked to yesterday and tomorrow. Isolated, the various activities Then, when the Dow continues its plunge of the specialist may make no sense what so past the levels at which investors were ever. Yet systematic knowledge of the advised to look for support, they will be told to market’s historical trends reveals that while look for support at levels that are still lower. the specialist will be profoundly influenced by Then, when these levels are penetrated, they what happens in the present, what happens in will be told that the experts expect to find the present or over the short term will be support at the old lows. Then when some or profoundly affected by and runs parallel, so to all of their stocks begin to penetrate their old speak, with his longer term inventory lows, they feel it is then too late to sell. Near objectives. the bottom they will hold on until the media grows pessimistic. Then, thinking he should In other words, if he establishes a downtrend try to save something, investors will sell from a high today, he will begin to precipitate everything. public selling tomorrow. The inventory he acquires in the course of this first decline from We have seen that the investor’s a high then becomes a permanent element of disappointments are proportionate to the the rallies which must follow and which he degree in which his activities unknowingly conducts in order to unload his unwanted assist in the development and refinement of inventory of stocks. One can make the following the specialist’s practices. When investor’s are generalization about these rallies; that the insider buying, on balance, specialists are selling. selling and short selling occurring at the rally When investors’s commit themselves to highs have a specific relationship to the forthcoming declines from rally highs. heavy selling, specialists are buying. Thus the public’s bearishness is actually bullish, and its Insider selling and short selling are not, bullishness is, in fact, bearish. however, the only determinate of the extent of the decline. The relationship between public It should now be clear that nothing is natural; selling and its impact on the specialist’s nothing is, as it seems to be. The movement inventories also determines the extent of the of stock prices is not the reflection of decline from a rally high and the plan of action economic law. The present and future trends that will be taken by specialists to unload this of stock prices are in the final analysis, inventory. prejudiced by the expectations and objectives of the Exchange establishment’s elite clique. Inevitably as prices move down from the final We have observed that the specialist’s price highs, the investor’s financial page will be advising movements are based on an awareness of him not to abandon faith in the underlying strength what he already knows will take place. In this of the market. He will be told, “It is only logical sense it can be said that the specialists vision to expect some sort of pullback, or at least a of things to come underlies and gives rise to consolidation phase in the market.” The the manner in which he utilizes price in order investor’s problem will be rallies in the Dow, to generate the forces of public supply and demand. In fact, it is possible to say that the future is molded by the specialist and his Naturally it is in the interest of Exchange system into a highly flexible blueprint to be insiders to spread the propaganda that a followed to its logical conclusions through move out of common stocks and into bonds time. Stock charts, which record a stock’s as a “defensive measure” during periods of high, low, and close outline the past history of recession is advisable, because investors these blueprints. then sell their common stocks to these insiders at the very time stock prices can be Below I have listed nine traditional investor expected to soon advance. Their chief views and compare them against my advantage to an investment advisor is that principles for investing in the market. As tradition allows him to stick half of a investors in the market place see where your multimillion-dollar portfolio into bonds, thereby investing philosophy’s match up in relation to cutting in half his workload and his exposure these views, and how they relate to the to criticism. He is “Safe” when he loses market’s actions now. money in bonds since, like everyone else; he acted in what is termed a “defensive” 1) Traditional View: At times of recession one manner. should buy “defensive” issues, including bonds. Defensive issues are, among others, 2) Traditional View: There are times when it is utilities, foods, tobaccos, food chain stores. safer to trade that to invest.
My View: In times of recession common My View: If the investment environment does
stocks can advance more dramatically than in not appear conducive to commitment for long- more prosperous economic periods. This is term capital gains under minimum risk because the tendency of the public is to circumstances, then one should properly assume that stock prices advance only to the remain out of the market and in cash accompaniment of good earnings instruments such as commercial paper and announcements. Specialists capitalize on this C.D.s. Although trading on the basis of short- myth by advancing stock prices when term rallies can occasionally be profitable, the conditions are at their worst and dropping risks, in my opinion, are too high and the stock prices when conditions are booming. As rewards to small to be acceptable. for buying defensive stocks: the only stocks that should be bought are (A) those that give 3) Traditional View: Economic developments evidence of specialist accumulation and (B) affect public opinion, which affects stock those that serve to limit the investor’s risks prices. because of active institutional participation. My View: The stock market is an internal As for investing in bonds, I consider them to operation. Economic developments do not, be a high risk for the simple reasons that therefore, cause stock prices to move one bond prices are even more manipulated by way or the other. They can and will be used to insiders than stock prices, trades are not rationalize stock price movements or to visible on a ticker tape, and information exploit investor psychology. In the final concerning the transactions of insiders is analysis, however, although economic nonexistent. Bonds are an indispensable conditions do not influence the market, the method of corporate financing which provides market does have enormous impact on the investment banking industry with economic conditions. enormous sources of income. If these profits 4) Traditional View: The Federal Reserve are to continue, the industry must condition controls booms and busts through its control investors to believe that their portfolios should of the money supply and interest rates, which at times include a large percentage of these in turn affects the market. issues. My View: The Federal Reserve system is an drop prices before a major rally so that you instrument of the Stock Exchange could well be “cutting a loss” just before it establishment. Thus, when a major rally or turns into a major gain. The time to sell, bull market is underway, the Fed can be whether you have established a profit or loss, expected to create conditions that cause is when, after an advance in stock prices you interest rates to decline. When stock prices have evidence of big block specialist selling. are ready to decline, the Fed will institute conditions that again cause interest rates to 7) Traditional View: On tape watching: Expanding volume on a rising market is bullish. rise. Expanding volume on a falling market is bearish. Declining volume on a rising market is By lowering interest rates the Fed and banks bearish. Declining volume on a falling market is cause the public to move out of cash bullish. instruments and into stocks as stock prices move to their highs. Since the public has My View: Expanding volume on rising stock been conditioned to believe that lower interest prices is bearish, since it indicates increasing rates cause an advance in stock prices, the insider distributions, which tends to maximize Exchange has a ready alibi to hand to the itself as stock prices near their highs. media for rising stock prices. When interest Expanding volume on falling stock prices is rates are raised to higher levels as stock bullish, since it indicates that specialists are prices move to their lows, the public is accumulating increasing quantities of stock, persuaded to sell their stocks and move into which they wish to dispose of at much higher cash instruments – thereby not only enabling price levels from those they bought it at. insiders to accumulate more shares but also Declining volume on rising prices is bullish, preventing these investors form profiting from since it indicates specialists are managing to the advance in stock prices when it occurs. advance stock prices covertly without By the same token, the increase in interest attracting much public attention. rates also provides the Exchange with the alibi it needs to legitimatize falling stock This is a strategy employed by specialists prices. when they have accumulated large inventories of stock at a low price, which they 5) Traditional View: Play a trend and get out wish to dispose of at much higher price levels. when it seems to be stopping. An advance on low volume, therefore, allows them to retain the bulk of their inventories in My View: A stocks trend will always seem to order to dispose of it at optimum price levels. stop at one time or another as it proceeds Declining volume on falling prices is bearish, toward its highs. That is because specialists since it indicates that specialists will continue will attempt to shake investors out of stocks to lower stock prices until their inventory before advancing them to their highs. The accumulations necessitate a rally. only time to “get out” is on the appearance of major selling by specialists. 8) Traditional View: Big blocks on upticks are bullish signs. 6) Traditional View: Cut your losses let your profits run. My View: Big blocks on upticks are bearish, since they indicate that insiders are My View: Follow this bit of folklore and, on distributing inventory and are or soon will be the one hand, you may well be cutting your selling short. On the other hand, big blocks on loss just before a major rally takes place, downticks are bullish, since they indicate while on the other hand, by letting your profits insiders are accumulating stock that they will run, you are assuming you can determine soon want to sell at higher price levels. when your profits are about to become losses. The fact is, specialists will always 9) Traditional View: A high short interest number is bullish.
My View: Short selling is an activity that
makes declines in the market place profitable to specialists, not investors. The media, however, persuades most investors to believe that investors are responsible for high short interest. It is then suggested since they must inevitably “cover” their short sales, this will cause a sharp advance in stock prices. Hence investors are lead to believe that high short interest is bullish and a low short interest is bearish. The fact is however, the specialists only sell short when they intend to drop stock prices. Since more than 85 percent of all short selling is done by Stock Exchange specialists and other members, a high short interest is a sign that the market is doomed to a decline.