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Harley,
To say that by watching prices all day from the comfort of your easy chair,
even if they are in real time, you can discern what's going on behind the
trades is folly. It's like watching a poker game with all the players hidden
behind curtains. All you see are chips being moved around the table.
As you alluded, about the only thing that can be seen is if the Bid or Ask
is being hit in size or not. While this may provide some gauge as to Buying
and Selling pressure, you can never be sure what's causing it, i.e. customer
orders, offsetting orders due to options/futures activity, or just a market
maker/specialist balancing his "book" or taking an outright stake in the
stock. Further, you can't even be sure the trade represents a single order
or several orders lumped together. Of course, exchange order tickets are
clearly marked Buy, Sell, Sell Short, but only the orders Floor Broker and
Specialist see it and it's not transmitted on the tape.
That said, there is info that can be observed by the Floor Broker on who's
doing the buying and selling and at what size. This is the kind of "inside"
info the Floor Broker passes back to his trading desk. This info, when put
together with tidbits gleaned from competitors, rumor and innuendo allows a
trader to take a read on the tape and possibly gain some advantage. On the
NASDAQ, customer trading desks play cat & mouse all day long with market
makers. Good traders learn the "tells" in the voices of their counterparties
on the phones. It's something that can't be transmitted thru a computer
screen to your living room!
That's why some institutional traders who "retire" to trade from home fail
miserably once they lose this insiders perspective. It's also why
institutions go to great lengths to disguise their trades. A good example is
the program trades we hear so much about. A broker will actually even pass
these massive orders thru his competitors to hide its intentions.
Bottom line is that all these accumulation/distribution indicators (except
for perhaps Lazlo Birnyni's Money Flow) are basically just "fun with
numbers."
regards,
Rick
-----Original Message-----
From: Harley Meyer <meyer@xxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Tuesday, August 11, 1998 6:43 AM
Subject: Re: accumulation/distribution
>Al,
>After a few moments thought and with a little logic I think have the
>answer. First of all we know that when we place an order to short on the
>NYSE the pit knows if it is a sell or short. Otherwise there would be no
>waiting in the (short) queue for our trade to be executed.
>So if Merrill Lynch is the firm supporting the inside market their pit
>person would know.
>
>So this solves the NYSE question. The NASDAQ might be no different. Two
>experiences. I had placed an order to short on the inside market and the
>order was not taken by a buyer. I called Datek and the person explained
>two things: one that they didn't have to trade with on instinet and two
>that they might want to trade with because they didn't want me to short
>the stock. I didn't ask him how they knew I was shorting the stock. But
>on my statements when I have turned a trade from long to short or vice
>versa the shares on the transaction are generally split and the
>transactions occur at different times.
>
>Maybe some one else can shed some light on this as well.
>
>Harley
>
>Al Taglavore wrote:
>>
>> On a post of 8/8 in response to an inquiry from Michael, Harley Meyer
>> wrote:
>>
>> "......The large
>> interest who is supporting the market on the
>> inside is running low on resources and does not
>> want to spend those resources on some one shorting
>> the stock as opposed to eliminating someone who
>> already holds the stock and is going to sell it......"
>>
>> I have been reappraising the values that I place on volume, after
observing
>> that all volume "is not created equal". My question is how can those
>> supporting the market determines if someone is selling short or holding
the
>> actual stock?
>>
>> Al Taglavore
>
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