Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

The "Blueprint" for Stock Market Manipulators

Companies / Market Manipulation Mar 18, 2013 - 08:15 AM GMT

By: Money_Morning

Companies

David Zeiler writes: While they may have perfected the trading strategies that use retail investors as patsies to enhance their profits, Wall Street titans like Goldman Sachs Group Inc. (NYSE: GS) and JPMorgan Chase & Co. (NYSE: JPM) didn't invent them - that honor goes to a man named Richard D. Wyckoff.

You may not have heard of Wyckoff because he died in 1934. But the book he published in 1931, "The Richard Wyckoff Method of Trading and Investing in Stocks - A Course of Instruction in Stock Market Science and Technique," became the blueprint for Wall Street's big investment banks shortly afterward, and remains so to this day.


A stock runner at age 15 (that was in 1888), Wyckoff opened his own brokerage when he was just 25. He studied the habits of the most successful traders of the day - Jay Gould, J.P. Morgan, Andrew Carnegie - with the goal of synthesizing what he learned into a comprehensive market strategy.

Wyckoff first set out his ideas in a popular 1920s newsletter, "The Magazine of Wall Street," eventually publishing them in book form.

Wall Street traders eagerly adopted Wyckoff's strategies, which emphasized technical analysis but also outlined how big players could exploit less sophisticated investors to earn huge profits.

It's been a popular Wall Street game for over 80 years.

"The truth is that Wall Street has stacked the deck against you," said Shah Gilani, Money Morning Capital Wave Strategist and editor of the Wall Street Insights and Indictments newsletter. "That's why you need to understand how the game is played. Otherwise, you'll end up a Wall Street patsy."

The Richard Wyckoff Trading Strategy
What's most striking about what Wyckoff wrote in 1931 (and said in his newsletter prior to that) is how closely it matches what we see happening on Wall Street today.

Once a big operator has identified a stock ripe for trading, Wyckoff said, it will gradually, quietly accumulate a position in it to avoid tipping off any other investors.

In this stage, the idea is to buy the shares as cheaply as possible with actions that drive the price down. So the big trader "raids the market for that stock, makes it look very weak, and gives it the appearance of heavy liquidation by sending in selling orders through a great number of brokers," Wyckoff wrote.

Mechanisms to keep the stock price from rising too high during this phase include strategically selling large blocks of shares while spreading negative news about the company in question.

This strategy also helps weed out most of those who want to sell the stock, help setting the stage for the big run-up to come.

Ideally, the big trader tries to accumulate the bulk of his position right before some major positive news breaks - news that the trader knows about or expects to happen.

"You have often noticed that a stock will sell at the highest price for many months on the very day when a stock dividend, or some very bullish news, appears in print," Wyckoff wrote. "This is not mere accident.

"The whole move is manufactured. Its purpose is to make money for inside interests - those who are operating in the stock in a large way. And this can only be done by fooling the public, or by inducing the public to fool themselves."

Just before the positive news breaks, the big trader buys even more shares, creating strong upward momentum that dupes less sophisticated investors into buying and driving the stock toward a target price.

After the news hits and the stock peaks, the big trader will sell part of the position into the frenzy of buying by retail investors who think they're getting a hot ticket.

For the weeks after, the big trader plays the earlier game in reverse, keeping the stock near its peak while unloading shares until they're gone.

And then the trader shorts the stock, slowly building his short position as he did his long position.

When it's time to cash in for the second round of profits, the big trader cancels any buy orders he had made to prop up the stock.

"The specialist in the stock then tells some of the moreimportant floor traders that the stock is in a weak technical position and that there is no support for the next 8 or 10 points and they all get together and raid it down ... at which point the operator covers his shorts," Wyckoff wrote.

Of course, at this point it's the investors who bought at or near the top - mostly of the retail variety -- who take a bath, while the big trader counts his profits.

It Just Happened Again
If you have any doubts this is going on every day on Wall Street, just look at what happened with Goldman Sachs and the recent sale of H.J. Heinz Company (NYSE: HNZ) to Warren Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) for nearly $28 billion.

Goldman had to be aware that the Berkshire deal was brewing, yet maintained a rare "Sell" rating on Heinz right up until the deal was announced Feb. 14.

In fact, Goldman went out of its way to reiterate its Sell rating in a Feb. 10 report, lowering its price target to $53 from $54 and saying it expected the stock to "underperform as top-line growth continues to disappoint."

As the Web site Zero Hedge pointed out at the time: "What does a Sell rating really accomplish? Well, in this case, and in all such cases, it merely provides the firm's prop, pardon flow, traders the opportunity to accumulate the shares its "clients' are advised by the same bank's sell-side group to Sell, preferably to the bank in question."

HNZ rocketed from just over $60 to $72.50 on the day the deal was announced.

Meanwhile, the Securities and Exchange Commission (SEC) is investigating a sudden spike in Heinz options trades that originated from a Goldman account in Switzerland one day before the deal was announced.

Whoever made the trades pocketed about $1.7 million.

The episode is a reminder to retail investors that they need to keep an eye on the Wall Street big boys to avoid becoming their trading fodder.

Gilani said investors need to abandon the buy-and-hold strategy pushed on them by Wall Street's "experts" and instead "think like a trader. Know what entry points are good places to buy. Know what points are good selling points. Trading means having a plan.

"The way to play the Wall Street game is to do what they do, not what they say you should do," Gilani said.

[Editor's Note: If you're fed up with the rampant corruption, double-dealing, and protection of Wall Street by Washington (at the expense of the taxpayers on America's Main Street), then you need to read Shah Gilani's Wall Street Insights & Indictments newsletter. As a retired hedge fund manager, Gilani is a former Wall Street insider who knows where all the bodies are buried. But unlike most insiders, he's not afraid to tell you where they are. He's also got some pretty good ideas how to fix this mess - and how to protect yourself until the cleanup takes place. Please click here to find out more. The newsletter is free.]

Source :http://moneymorning.com/2013/03/15/the-wyckoff-legacy-82-years-of-wall-street-profiting-at-your-expense/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules