Tuesday, November 16, 2010

Doctor Copper has Fallen off it's perch, the gig is up

Doctor copper did a nice daily backtest of the PRS 100, and then went to break the 133 and 177.   Trend change folks.

There is a chance it's is just a head fake, but that is less than 50%, don't know exactly where to place the odds, but I wouldn't cringe at saying 25%.  

Market (and by that I mean HBB Humongous Bank and Broker) has been playing a game I call "internal correction" and I think I got that phrase from the blogosphere, maybe from Bluechip Bulldog's Brinkley. 

Here is the game:  Ramp and dump various individual stocks, hitting stops up and down, and enjoying profits on momentum plays that the big HBB gets other algo's and retail to follow there big moves and then HBB abandons the campaign, and stock corrects/overshoots to the down side.     Play this with say 50 or 200 stocks at a time, and do it for months, and wallah....HBB has extracted the maximum capital from the market.

Obvious gaming and manipulation, but that has always been part of the market.  Some of it is legal.   Collusion on a grand scale is not legal though, but it is like the old saying that if you make a lie big enough, and keep repeating it, it can become the truth.   Now HFT and Algo/Bot's are being used as an excuse for the ramps and tape slams.  I think the truth will be a bit more insidious.   Say there are 100 major players in the S&P futures market, the most liquid of the markets.   Even so, there is obvious collusion in manipulating the tape, most easily done during the "off hours".   2 to 3 years ago, I could play that tape very successfully, now the manipulation has gone beyond blatant.  How do you get 100 players to all shift their bid and ask to allow stops to be popped.....hmmm....phone calls, or maybe Skype and Email.   It is not simple algo's.

Now look at the other futures, that are all less liquid, i.e. easier to control.   I would play copper futures, or silver futures.   IF the game was even close to being fair.   It is not.   They are highly controlled.

There are some leveraged ETF's on silver and probably other base metals now, however, those are "run" by options (or even more obtuse Swaps) and we saw what happened in the flash crash.    Massive moves in the ETF's as the HBB played games with the options.   I feel like a HAL2000 figuring out that the only way to win is to decide not to play (or join the dark side--good luck with that)

See Europe on the front page of NYT --- Tin Foil Hat says get ready for a throw off ramp to the Euro, and very short term drop in Bucky.   Maybe not.   Be on guard.

The 2010 YOY comparisons on earning to 2009 was like shooting fish in a barrel.   2009 stunk so bad, it was easy to beat, 2011 will have a much tougher time comparing to 2010.

And finally, on a gripe about Thinkorswim, this is the 4th day in a row that TOS forced an update.   What is up with that?  

1 comment:

  1. The Dr.: I don't ever recall seeing such a geometrically perfect curve before. Wow.

    ES did a perfect kiss goodbye of the uptrend line yesterday (right at 1200.

    Institutions appear to be selling out now, they sold into the entire rally since mid Sept., and just now are starting to drag the market down.

    Please have a look at my blog, I would appreciate your input on my observations.



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