i think a large portion of this action is due more to simple market mechanics than to slickness or deception on the part of the market maker.
reversion to the mean applies on many levels. if a cluster of buy orders is hit below, then most likely the market will next hit the cluster of sell orders above. thus when there is more or less equilibrium in terms of order flow the market will have a higher tendency to seesaw between the spread than to go anywhere.
with sell orders above and buy orders below, the market maker is going to spend most of his time trying to exploit the structural gap that pays his bills, and will decrease the size of that gap in doing so. i don't think he is overly concerned w/ being a wiseguy.
also, smart off floor players like to get out at obvious breakaway/expansion points because they know there is usually more liquidity there to absorb their exit. Paul Tudor Jones, for example, mentioned he always tries to liquidate half his position at new highs. So if you are entering on a new high/new low, a lot of times you are cashing in the chips of other traders who are bigger/faster than you. Amateurs bet on breakouts, pros bet on mean reversion (not all the time but generally so).
i'd also like to see a study on the size of the average daytraders teeny little stop versus the average size throwaway move, i.e. if you are usually using a five cent stop but your market has at least a six cent farting around quotient, then guess what you are going to get blipped out constantly.
i'm no friend of market makers/specialists etc. I just think it's illogical to assign them as much power or as much blame as they get around here.
p.s. that's a funny picture Gekko, makes you wonder what he is thinking. maybe somth like 'hi there big boy, i'm not wearing any pants'
