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PPT Gone Public?
Posted On Tuesday, May 18, 2010 at at 5:09 PM by Finance Fanatic
It seems as though investors took Meredith Whitney's words to heart as the Dow finished down 114 points to end the day. Financials especially struggled which yielded some strong returns for FAZ for the day (up 10%). No doubt, there is a much more resisting trend that is lurking in markets currently. When analyzing charts of recent months, you will see movement up with much more fluidity. However, now we are seeing a continual wall being hit, despite some more favorable news which has been announced recently.
Institutions are having a hay day with the market right now. Some of my hedge fund insiders have told of some their recent activity. Manipulation is running ramped in the markets currently, and not only from the government. Many institutions are taking advantage of this low volume trading and seeing strong gains on these volatile pushes. Also, they aren't choosing sides. I have heard from multiple sources that money is being made from these funds on both the long and short side. No wonder we are in this crazy market!
Today, the SEC proposed an initiative that, in a sense, will publicly allow the PPT to take action in markets. Under the initiative, it states that any stock found within the S&P 500 that experiences a 10% drop in stock price in one day, would be temporarily halted for 5 minutes or more. These so called "circuit breakers" would be applied during Eastern trading hours of 9:45 to 3:35 PM. In describing these circuit breakers, SEC Chairman, Mary Schapiro said:
"We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges. As such, I believe it is important that all the exchanges quickly reached consensus on a set of uniform circuit breakers that would be triggered when needed."So, in other words, lets completely take away the idea of "free market trading." For years, there has been an extremely large amount of evidence supporting the notion of government sponsored organizations (PPT) who are commissioned with the task of preventing market free falls. There are some out there who felt the idea was rubbish and absurd. Well, there you have it, The SEC wants to make it public. They learned from our "mini crash", that they were very much out of their league to try and halt the crash, while also remaining discrete at the same time. This will allow them to publicly interfere with free market trading and create who knows what kind of trading trends. In my opinion, regulation is getting out of control and The SEC are overlooking some serious consequences that could arise from their plan.
If thinking that a temporary ban on certain free falling stocks will take away the negative sentiment of the sentiment, they are mistaken. These stocks that would be closed for trading would only bring more negative sentiment to investors. It is much like when companies were being bailed out by the government. Banks stock prices were crushed when aide was announced, because it revealed their financial weakness. So to will be the case for these "circuit breakers" in my opinion.
At any rate, I'm looking for a bit of a rebound either tomorrow or Thursday, before an even stronger push down. As I stated in a previous post, we are seeing an almost identical leveling off chart for the S&P. If that is the case, down we go. Happy Trading.
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