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Playing With A Top
Not the kids toy that you spin across the floor, the
stock market specialist's toy that they spin across
the media. The spin is
getting faster.
It is at times like this that I most miss Richard Ney;
actor, financier, creator of The
Ney Report, and author
of best selling investment books such as The
Wall Street Jungle.
Mr Ney had both a sharp wit and an insightful
view of what he called stock "merchandising operations" by
individual stock specialists on the floor of the
New York Stock Exchange, (NYSE).
As we play around with new highs
and round numbers, Richard Ney would have been watching
the volume moves in a few key stocks of the Dow
Jones Industrials.
His
primary argument was that while exchange spokesmen will
say "it takes
someone selling their stock and someone buying stock
to make a market," in reality the selling may
well be someone selling stocks short.
A stock short sale is made by borrowing stock and then
selling it in anticipation of a drop in price. When
the speculator, or a NYSE specialist, wants to exit
the position they buy stock to return to the lender.
If the price has dropped they make money, if the price
increased - they lose money.
Richard Ney pointed out that
frequently the person selling short at market
tops was a market making specialist on the floor of
the NYSE.
Mr Ney was not against short
selling - he knew its value to markets. He was against
the hidden actions and agendas of market specialists
that have unilateral power to set price on NYSE issues
they trade. The "smoking gun" is found in details
of a day's transactions, Ney used these indicators
of manipulation to piggy back his investor's actions
on medium and long term positions taken by specialists.
His contention was that market specialists on the floor
of the NYSE used the emotional greed and fear generated
by price action to move their merchandise in a profitable
fashion. Again and again he pointed out where large
market moves created volume - not the other way around.
Regarding price and volume, he analyzed it far differently
then you will see in the financial press. The NYSE will
provide press releases during and after the day highlighting
how new highs were accompanied by huge volume. The financial
media will repeat this "news" with the implication
that volume drove stock prices higher.
Observation will show what Mr. Ney continually pointed
out, prices are normally moved on low volume - they
reach extremes on high volume. He presented his evidence
that at lows the NYSE specialists and market insiders
were buying strongly while the public sells in panics.
He then would follow the progression as the prices were
moved up on lower volume to an emotional big move trigger
point where high volume was once again used for those
insiders to first sell the stock they had purchased,
and then sell much more stock short into that topping
volume. The prices would then be dropped again on low
volume to where the short sales could be profitably covered
and long positions re-established.
Richard Ney's books give far
more depth and insight than I can apply to his well
substantiated theories. His market calls are but one
of the reason's I miss him today.
I also miss his elegant presentations of reality, his
obvious concern for truth, his genteel manners and appearance,
and a host of other factors.
You should miss him because he
would have written this page with a great deal more
finesse than I have managed.
Find one of Richard
Ney's books in a used book store - and read it.
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