4 replies to this topic

[OEXCHAOS]

Guys, Ike caught me a little flat footed on this in our interview, but I had been thinking about it for a bit. My read is that the elimination of this rule has two important implications. The first is with regards to the tick---many have noted that the average has gone from +200 to about +11. I and others have noted that is because the big uptick moves aren't happening. I can't remember the last time I saw +1100 ticks, but not long ago it happened all the time. Condolences to those who use TICK in their systems. My read on that is that the big upticks are going away because the big programmers have found a better $0.04 nickle to exploit, probably via an option strategy and a basket of stocks that they short. I am just guessing on that however. I'd be curious to see if any of you guys have any theories or data. The second implication is simply Bearish. They didn't change the rule to help the little guy. You guys know that. I know that. I do know that I've made big money in a falling stock more than a few times back when I could short an OTC stock without an uptick. I'm looking at the less liquid RUT and thinking, "That's a big fat calf just waiting to be slaughtered..." Poor liquidity, overvaluation, tons of complacency, tons of amateurs, all just waiting for the trend to turn. When the Russell breaks, it's going to fall harder and farther than most expect. It's also going to bounce HUGE when it does as there will be many more shorts than normal in there. If you trade that sector, take your profits early, or at least don't be patient on bounces. I will go on record predicting that the first break will be huge but nearly totally reversed before the next leg down. It'll be hard to play in funds, too. Big potential but much more difficult to play. The Midcap will likely be a similar story. Anyway that's my thinking. Mark

[swinger]

Guys,

Ike caught me a little flat footed on this in our interview, but I had been thinking about it for a bit.

My read is that the elimination of this rule has two important implications. The first is with regards to the tick---many have noted that the average has gone from +200 to about +11. I and others have noted that is because the big uptick moves aren't happening. I can't remember the last time I saw +1100 ticks, but not long ago it happened all the time. Condolences to those who use TICK in their systems. My read on that is that the big upticks are going away because the big programmers have found a better $0.04 nickle to exploit, probably via an option strategy and a basket of stocks that they short. I am just guessing on that however. I'd be curious to see if any of you guys have any theories or data.

The second implication is simply Bearish. They didn't change the rule to help the little guy. You guys know that. I know that. I do know that I've made big money in a falling stock more than a few times back when I could short an OTC stock without an uptick. I'm looking at the less liquid RUT and thinking, "That's a big fat calf just waiting to be slaughtered..." Poor liquidity, overvaluation, tons of complacency, tons of amateurs, all just waiting for the trend to turn.

When the Russell breaks, it's going to fall harder and farther than most expect. It's also going to bounce HUGE when it does as there will be many more shorts than normal in there. If you trade that sector, take your profits early, or at least don't be patient on bounces. I will go on record predicting that the first break will be huge but nearly totally reversed before the next leg down. It'll be hard to play in funds, too. Big potential but much more difficult to play. The Midcap will likely be a similar story.

Anyway that's my thinking.

Mark

In a bull market, a short sale guarantees one thing...a buyer at a higher price.

With so much money going into ETF's, it gets even better...an ETF is capitalized at inception and then folks just trade IOU's while the underlying REAL assets are held in a protected trust. No matter how much folks short an ETF--not one share of underlying real stock is sold into the market. The shorted ETF shares continue to exist--so no liquidation of assets is effected. The goons just let the suckers pile in short and then take it back up when enough suckers are on board--knowing that eventually the pressure of the jam will cause them to crack and buy to cover.

New short sale rules just make it that much easier to roll up new victims during the quick (engineered) selloffs.

The derivatives scam can work indefinitely so long as sufficient numbers of folks continue to fight the dominant trend. It really IS different this time the way the quasi-governmental and governmental agencies provide capital to the private trading banks at opportune moments to run the masses of fundamentally-skeptical short-sellers. Way too many folks confusing what appears on the surface to be sound reasoning and logic with actual opportunity for profit in the markets.

just my .02

[NAV]

The second implication is simply Bearish. They didn't change the rule to help the little guy. You guys know that. I know that. I do know that I've made big money in a falling stock more than a few times back when I could short an OTC stock without an uptick. I'm looking at the less liquid RUT and thinking, "That's a big fat calf just waiting to be slaughtered..." Poor liquidity, overvaluation, tons of complacency, tons of amateurs, all just waiting for the trend to turn.

When the Russell breaks, it's going to fall harder and farther than most expect. It's also going to bounce HUGE when it does as there will be many more shorts than normal in there. If you trade that sector, take your profits early, or at least don't be patient on bounces. I will go on record predicting that the first break will be huge but nearly totally reversed before the next leg down. It'll be hard to play in funds, too. Big potential but much more difficult to play. The Midcap will likely be a similar story.

Anyway that's my thinking.

Mark

I am thinking the opposite. These days when russel breaks, it's virtually a freefall. With the elimination of the rule, it's gonna have strong retarcement rallies as opposed to a freefall, cuz there will be more shorts waiting to cover at every downswing.

[OEXCHAOS]

The second implication is simply Bearish. They didn't change the rule to help the little guy. You guys know that. I know that. I do know that I've made big money in a falling stock more than a few times back when I could short an OTC stock without an uptick. I'm looking at the less liquid RUT and thinking, "That's a big fat calf just waiting to be slaughtered..." Poor liquidity, overvaluation, tons of complacency, tons of amateurs, all just waiting for the trend to turn.

When the Russell breaks, it's going to fall harder and farther than most expect. It's also going to bounce HUGE when it does as there will be many more shorts than normal in there. If you trade that sector, take your profits early, or at least don't be patient on bounces. I will go on record predicting that the first break will be huge but nearly totally reversed before the next leg down. It'll be hard to play in funds, too. Big potential but much more difficult to play. The Midcap will likely be a similar story.

Anyway that's my thinking.

Mark

I am thinking the opposite. These days when russel breaks, it's virtually a freefall. With the elimination of the rule, it's gonna have strong retarcement rallies as opposed to a freefall, cuz there will be more shorts waiting to cover at every downswing.

NAV, you and I agree on the last half, but I'm saying that it'll fall hard because in addittion to "natural" selling, there will be piling on by all manner of short-seller. That'll take it down pretty hard. I would suspect that the powers that be will want that, too. Then, of course, at the low tick, they'll just buy it up and as you predict the short covering rally will be big.

Note, so long as there's no real natural selling, the change in the rule is bullish, as you note.

Mark

[NAV]

The second implication is simply Bearish. They didn't change the rule to help the little guy. You guys know that. I know that. I do know that I've made big money in a falling stock more than a few times back when I could short an OTC stock without an uptick. I'm looking at the less liquid RUT and thinking, "That's a big fat calf just waiting to be slaughtered..." Poor liquidity, overvaluation, tons of complacency, tons of amateurs, all just waiting for the trend to turn.

When the Russell breaks, it's going to fall harder and farther than most expect. It's also going to bounce HUGE when it does as there will be many more shorts than normal in there. If you trade that sector, take your profits early, or at least don't be patient on bounces. I will go on record predicting that the first break will be huge but nearly totally reversed before the next leg down. It'll be hard to play in funds, too. Big potential but much more difficult to play. The Midcap will likely be a similar story.

Anyway that's my thinking.

Mark

I am thinking the opposite. These days when russel breaks, it's virtually a freefall. With the elimination of the rule, it's gonna have strong retarcement rallies as opposed to a freefall, cuz there will be more shorts waiting to cover at every downswing.

NAV, you and I agree on the last half, but I'm saying that it'll fall hard because in addittion to "natural" selling, there will be piling on by all manner of short-seller. That'll take it down pretty hard. I would suspect that the powers that be will want that, too. Then, of course, at the low tick, they'll just buy it up and as you predict the short covering rally will be big.



Mark

I still disagree on the first part. The very reason it's having a freefall these days is becuase of lack of enough shorts to cover. With the elimination of new rule, there should be enough shorts covering at every stage, creating sharp retracement rallies. Sad part is, russell is gonna become another ES for daytraders.

Note, so long as there's no real natural selling, the change in the rule is bullish, as you note.

I agree.