One of the hardest things for shallow-thinkers to grasp is that price in asset markets is not the only metric of import. As David Rosenberg says, most mainstream commentators (CNBC hosts) and investors “live only in the moment”. Sadly that approach is a sure way to suffer great capital losses repeatedly over time. Volume is one of the rare technical gauges that can actually help us get ahead of the curve a bit. This is why seasoned market analysts always want to look at volume as one of the most important barometers. It is worthwhile to note that volume in the stock rally off the March 2009 lows began to wane a few months in and by last June was showing more selling pressure on up days than buying pressure. Only on down days did volume pick up. Interestingly while markets rebounded from June 2010 losses in July, the volume of buyers hit a fresh low. Lasting gains need a steady stream of new buyers and believers to sustain. Thinly traded markets are notorious for sharp, shocking losses in short periods of time. It's just the way it is…
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I think the current stock markets are completely detached from reality. I agree with many of the following ideas…….
http://www.greatponzi.com/articles/20100324-playstocks.html
If nobody wanted to sell shares in company 'A' then the stock price should go up until a buyer puts in a high enough bid to entice someone to sell. Correct? If true, then in a way high volume prevents such manipulation cause the money needed to move a stock could be considerable.
What happens though if the 'players' have incredible amounts of money at their disposal or have the power to change trading rules, how assets are valued etc – then couldn't the same kind of manipulation impact the direction of entire markets? I would suspect the big banks, corporations or even government (via PPT) on low volume days could create market manipulation/momentum to the upside. There is certainly incentive/motivation for them to do so – imagine if you are a bank with toxic assets, a company in financial distress or even a country whose debt is about to be downgraded – ALL of them would benefit greatly from the markets going higher – recently Greenspan said as much:
http://classic.cnbc.com/id/38152829
So back to my original question – Could the markets be manipulated to the upside especially on low volume?
If you happen to answer yes – I would very much appreciate some advice on what kind of investment strategy one could implement in the face of such manipulation.
Thanks
Are Structural Changes in Equity Markets Leading to a Loss in Confidence?
http://wallstcheatsheet.com/breaking-news/economy/are-structural-changes-in-equity-markets-leading-to-a-loss-in-confidence/?p=14839/
Inside Goldman Sachs
http://jessescrossroadscafe.blogspot.com/2010/08/road-to-serfdom-inside-goldman-sachs.html
All those companies doing well with “lots of cash”, eh? Reality is, as usual, a little different than what you hear in the mainstream media……………
http://www.marketwatch.com/story/the-biggest-lie-about-us-companies-2010-08-03
After reading the latest ECRI article (Aug.4), I simply don't understand why Gluskin & Sheff is not subscribing to the firm's Professional Services. Least Dave R. would get less criticism.
Well, the recession is not yet, but the mayor slowdown is baked in the cake. I wonder how the next (and after) PMI is going to look like.
I agree with you Attila.
I have to assume that all the institutional buyers plus yourself watch the charts from the Economic Cycle Research Institute, Baltic Exchange Dry Index plus many others…………………….. AND you still need to ask where the buyers are. Run for the hills my friends.