The Strange Volume Pattern Since 2003

The first chart shows the classic relationship between price and volume. (94-98) It is logical to expect a positive relationship between price and volume. Bear markets have started out with surges of volume but in general volume has declined with falling stock prices.

In 2003 this relationship changed. Since that time the most notable up moves have taken place declining volume. As the bull market has progressed, the level of program trading has increased hugely along with other derivatives based volume. Very little stock could have been moving into strong hands. Quite a bit of stock could have been moving out of strong hands.
Short interest has grown astronomically throughout the advance.
Most traders believe that our financial markets are pristine. The rest of this post is for those who, like me, believe that they are anything but pristine.
This low volume environment has made it possible for anyone with a few bucks, to place a blanket of bids under the market and hold the market in place until short sellers panicked. Without ranting on about the probable source of the bids, I will just say that IMO, the last half of 2006 and most of 2007 to date happened because of blankets of bid being placed precisely for the purpose of causing short squeezes.
To make a long story even longer, I just want to say that I was surprised that there was no follow through today. When short squeezes start falling short of expections it may be a sign that the blanket bidders have gone to the well too many times.

volume and price action activities...



http://www.stockchar...993846&r=66.png

The first chart shows the classic relationship between price and volume. (94-98) It is logical to expect a positive relationship between price and volume. Bear markets have started out with surges of volume but in general volume has declined with falling stock prices.

In 2003 this relationship changed. Since that time the most notable up moves have taken place declining volume. As the bull market has progressed, the level of program trading has increased hugely along with other derivatives based volume. Very little stock could have been moving into strong hands. Quite a bit of stock could have been moving out of strong hands.
Short interest has grown astronomically throughout the advance.
Most traders believe that our financial markets are pristine. The rest of this post is for those who, like me, believe that they are anything but pristine.
This low volume environment has made it possible for anyone with a few bucks, to place a blanket of bids under the market and hold the market in place until short sellers panicked. Without ranting on about the probable source of the bids, I will just say that IMO, the last half of 2006 and most of 2007 to date happened because of blankets of bid being placed precisely for the purpose of causing short squeezes.
To make a long story even longer, I just want to say that I was surprised that there was no follow through today. When short squeezes start falling short of expections it may be a sign that the blanket bidders have gone to the well too many times.

The answer is very simple. When Paulson became Sec of Treasury he paid a unique visit to each exchange.
You can figure out what was discussed at that meeting with exchange insiders by what followed.
The first manipulation using futures from Europe occurred at 03:00 AM when the German markets opened 8-15-06. That futures pump at 03:00 AM is bid support until the cash opens forcing BUY programs that carry the cash higher for 5 to 15 minutes. The market then drifts for three days, starts to sell off. Second day of selling again the futures are bid up at 03:00 AM again forcing buy programs. This was done repeatedly until the election in November. Recently we are seeing the same movie, push the futures up 10 points, buy programs drift, push futures buy programs drift. They allowed a 10% percent correction to satisfy the markets and it now looks like we will see the 03:00 AM push, buy programs drift wash rinse repeat.

The answer is very simple. When Paulson became Sec of Treasury he paid a unique visit to each exchange.
You can figure out what was discussed at that meeting with exchange insiders by what followed.
The first manipulation using futures from Europe occurred at 03:00 AM when the German markets opened 8-15-06. That futures pump at 03:00 AM is bid support until the cash opens forcing BUY programs that carry the cash higher for 5 to 15 minutes. The market then drifts for three days, starts to sell off. Second day of selling again the futures are bid up at 03:00 AM again forcing buy programs. This was done repeatedly until the election in November. Recently we are seeing the same movie, push the futures up 10 points, buy programs drift, push futures buy programs drift. They allowed a 10% percent correction to satisfy the markets and it now looks like we will see the 03:00 AM push, buy programs drift wash rinse repeat.

Larry,
I don't doubt that the futures markets have been used move the market.
It is my contention that there has been ongoing direct intervention. the placing of actual bids on a blanket basis. These bid days are easy to spot because invariably the secondaries respond out of proportion to the blue chips. It always looks like a dash to trash.

Good observation, now apply basic economics for a more predictive view. Sure, the blanket bids are there, but, I believe as Larry says, futures markets are being heavily used in this game as well-why-it's cheaper that way. It's all about the marginal utility of the pump money. With so much less money traveling at night, especially as Larry points out-at 3:00 in the morning-it's quite easy to induce a short squeeze-and drive the markets higher. The buying is very clever, and focussed, as well. Stocks that are heavily weighted in their indexes turn out to be favored "pump monkeys". As the Naz was weak today, the pump turned to a favorite used the last 8 months or so-the oils, and in particular-the OIH. Every time the market waned today, bang, the OIH got lit up. But, here in lies the rub. For all the attempted pumpimg of the OIH today-the overall market could not be righted. The marginal utility of the money spent on those pumps was quite poor. For all the pumping last night in the futures market last night-half was erased before the open, the other half soon after-again, low marginal utility of pump money. When the marginal utility of the pump reaches an unacceptable level-they step away, waiting for better moments. Lately, the blanket bids have an additional problem-fundamental news, mostly bad, and some of it just plain not spinable. Better they wait for moments like last Thursday, with mom and dad equity put players shorter the market than they have been in 7 years, with targets on their heads-now that, is easy money-with very little priming required(probably took no cash at all-just a couple phone calls-and a favor).