Classic market manipulation at the expense of the fourth segment ‘buy-and-hold’ investors (the “dupes”). In addition to earning trading commissions from investors, the large brokers/market makers also profit by trading for themselves. Following the prior week’s bear market, and in the spirit of “let no crisis go to waste“, they artificially adjusted opening prices on Monday downward to a “panic” level that prompted selling from fourth segment investors, providing them a supply of shares to re-acquire at the lowest possible fire sale prices. And the mini-rally was on from there. Worked like a charm (note cynicism).
While a lower Monday open was not unexpected, the extent was (Dow down 1,000?). Unfortunate timing for our weekly trades, as they were caught in this manipulation, with sell and sell short orders executing at very unfavorable prices.
Could this have been better anticipated in hindsight? In our 16 years of experience, second-guessing or outsmarting Wall Street has not been an easy task, nor very productive, and the more often we deviate from our proven strategy we risk not following a strategy at all, begetting poor annual results.
When the week was over, after multi-day many-hundred point swings, most stock prices were modestly higher – with some actions from China seeming to stabilize investor sentiment. Most long positions rose, and some shorts continued falling. Most shorts, though, are off their recent lows with a number of exit signals this weekend to lock in gains, but too soon to be buying.
Per analytics, 2 positive days does not define an uptrend. It remains to be seen if this sudden rally has staying power or will lose momentum, as quite a few short positions remain intact.
On the year, the Dow30 and S&P500 remain negative, only the Nasdaq Composite is positive.
Highlights: No new weekly highs. Double-digit long gains in AKAO +10% and PLNR +23% (3 wks).