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It's the old “head-fake” technique, which in this case exploits the ES
"first come, first served" order-line, and the ability/gall to put up a
lot of contracts to control the situation.
For example, suppose there are 30 orders totaling 800 contracts on the
bid. The head-faker then puts up 5 bids totaling 5000 contracts behind
those 30 orders, making the bid look strong. He sits there while small
fries line up behind him, and as the 30 orders in front are slowly
getting hit. Meanwhile, he could be sitting first on the offer selling
to small fries who took the strong-bid bait.
He then simultaneously lifts his 5 orders and takes out the rest of the
bids with his contracts short. Finally, the head-faker also manages to
be first in the bid line the next tier below, waiting to cover from all
the shaken head-faked small fries.
Sometimes you see more than one trying to head-fake at the same time,
consequently screwing each other's setup (and each other!), which can
make you dizzy, or amused, depending on whether or not you are trading
at the time.
Knowing exactly where you are in the order-line is critical. For us on
the “outside” we can write computer programs that can estimate where our
orders are in line by using CME's level II data. However the problem is
that when the contract number down-ticks, for example, you don't know if
it's someone lifting in front of you or behind you. The time and sales
data can help, but it appears to not be perfectly aligned with CME's
level II data, which is quite annoying.
I have noticed this technique being used more frequently in the past
several months, so perhaps people now have the ability to know exactly
where they are in line, or insiders are now exploiting that advantage
because their other techniques are no longer profitable.
-F
The ES is not immune to 'specialist' manipulation.
I have seen abnormal size +2000 bid or ask shut down the market.
Last Friday I saw +6000 on the bid, and then disappear in an instant,
without a subsequent price move.
I can assure you that 6000 shares did not trade,
and if they had the price would have moved.
So ...
who is profiting from this behavior ...
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