TAPE READING (chat room cont.)

[ljyoung]

Hey huskydog,

Let me pick your brain again. Saw this little message the other AM and wondered if you could comment on what effect this might have on the ability of MM's to tilt the board in their favor.

My reason for asking has to do with the questions I raised in earlier posts about the utility (or futility - ho, ho, ho) of using the premarket to get an edge on the early price action in various stocks. As mentioned before, I have a mountain of data which clearly shows that the premarket for equities is not some random walk in the park. The price levels and B/S activity have a lasting influence throughout the trading day.

As an FYI and for no other reason than to demonstrate credentials for critical thinking, I have a PhD in inorganic biochemistry with a specialty in spectroscopy so I know how to look at data. You fit your ideas to the data and not the other way around.

NASDAQ Regulatory Alerts
October 5, 2006
Regulatory Alert #2006-007 - Short Sale Exemption for NASDAQ-100 Securities, Effective Monday, October 9, 2006
Please Route To: Head Traders; Technical Contacts; Compliance Officers
What you need to know:
„X Effective Monday, October 9, 2006, NASDAQ-100 securities will no longer be subject to the ¡§tick¡¨ test of SEC Rule 10a-1 or the bid test of NASDAQ Rule 3350 when traded on NASDAQ and to NASD Rule 5100 when reported to the NASD/NASDAQ Trade Reporting Facility (ACT).
„X As announced in Regulatory Alert #2006-004, on September 13, 2006, the Securities and Exchange Commission (SEC) issued an approval order allowing NASDAQ-100 securities to be exempt from the NASDAQ Short Sale Rule.

TIA for any help.

lj

PS: If you believe that what Maverick said accurately portends the end of any usefulness at all for tape reading, then please tell me and I'll cease and desist.

 

[DMFist]

Hey Maverick ,

I've been reading this thread for a while and , I really appreciate your insight.
Do you know what is up with Market Imbalances , or more specifically why they don't really work ?
For example today AMD had over a million share "buy side " imbalance at the close , but as soon as it was published , the stock started to tank , also at 3:50 there was still a buy imbalance about half of it left...and the stock closed at the lows ..any ideas as to why this might happen?

 

[Maverick74]

Quote from DMFist:

Hey Maverick ,

I've been reading this thread for a while and , I really appreciate your insight.
Do you know what is up with Market Imbalances , or more specifically why they don't really work ?
For example today AMD had over a million share "buy side " imbalance at the close , but as soon as it was published , the stock started to tank , also at 3:50 there was still a buy imbalance about half of it left...and the stock closed at the lows ..any ideas as to why this might happen?

Imbalances don't mean the stock is going to move in the same direction. MOC orders really don't work much anymore. When AMD published that imbalance all it did was attract a lot of sellers looking to sell. All the imbalance means is that the specialist has to work a block at the close. In the old days when stocks really moved, you always had institutions that could never get all the stock filled they needed during the day. So but putting out there at the close like that, they would hope to attract liquidity. Well, now that stocks aren't moving much, they can be a lot more patient to work their orders over days or weeks. There is no rush.

 

[Maverick74]

For anyone that is interested in asking questions about anything trading related and the current state of of the trading industry, Don Bright and I will be holding a live chat for all of ET. Details are here: http://www.elitetrader.com/vb/showthread.php?threadid=80880

 

[Maverick74]

Just wanted to bump this thread for tomorrow.

 

[Maverick74]

For those of you interested, there is an article in the latest issue of TASC by my mentor at Worldco, Adam Wasserman, on tape reading. It's a good read.

http://www.traders.com/Documentation/FEEDbk_docs/Abstracts_new/Wasserman/wasserman.html

 

[megabucks]

Quote from shortseller:

ABC STOCK IS PRESENTED AT

100.00 (56k) X 100.05 (100)

All other factors being equal for the sake of discussion.

do you A go long at the bid ?

do you b go long at the offer?

do you c short at offer ?

do you d place short at bid ?

Well based on that it "appears" Bullish as we have bid size on a round number. Having a last print (price and size) would help immensely.

56k on bid could be window dressing. 100s on offer could be show for a dark pool - I would need to know if the bid is being taken and reducing; is either the bid or offer being taken and reloading ?;is bid and size moving up or 100s on offer holding it down? Is stock near it's day high or low ? Bottom line I would have a bullsih bias but watch the tape for a while - maybe throw a small buy lot at it in case it holds 100.

 

[speculatus]

Quote from megabucks:

Well based on that it "appears" Bullish as we have bid size on a round number. Having a last print (price and size) would help immensely.

56k on bid could be window dressing. 100s on offer could be show for a dark pool - I would need to know if the bid is being taken and reducing; is either the bid or offer being taken and reloading ?;is bid and size moving up or 100s on offer holding it down? Is stock near it's day high or low ? Bottom line I would have a bullsih bias but watch the tape for a while - maybe throw a small buy lot at it in case it holds 100.

No, the situation is bearish:

If the stock is trading lower and this bid is stale, it would get an immediate hit by an aggressive seller (he'll be more than glad to take such quantity at one price)!

If the stock is trading near the high and this bid shows say on a plus tick bid, most likely that what buyer has left - otherwise he wouldn't show his hand, so it will also get a hit buy a seller starting unloading his position at a high price, and since the buyer is done, the support will be minimal (if any), so the price will go lower.

At any rate, price always goes into size.

 

[megabucks]

Quote from speculatus:

No, the situation is bearish:

If the stock is trading lower and this bid is stale, it would get an immediate hit by an aggressive seller (he'll be more than glad to take such quantity at one price)!

If the stock is trading near the high and this bid shows say on a plus tick bid, most likely that what buyer has left - otherwise he wouldn't show his hand, so it will also get a hit buy a seller starting unloading his position at a high price, and since the buyer is done, the support will be minimal (if any), so the price will go lower.

At any rate, price always goes into size.

I see your point, but we both are using "if's" in our analysis. I agree if stock is near high he could be exhausting and showing his final hand and/or a last ditch effort to get 'public' involved by showing some bid size. Also if the size was on the offer near the high I would probably be more bullish. But my point was if he had the strength to make it near the high in the first place the odds are still slightly bullish in favour of momentum/trend until proven otherwise. Maybe the buyer has been riding size and plus tick bidding up to this point - or maybe it's near the low and big bid reloads are getting taken on an offer negative - i dunno. For my style I would want more info before taking on a position. Too many variables to base a decision just on that. I'll go long, you go short and if bid keeps reloading on a plus tick I win. If bid dries up and .99 becomes resistance you win.

 

[speculatus]

Quote from megabucks:

I see your point, but we both are using "if's" in our analysis. I agree if stock is near high he could be exhausting and showing his final hand and/or a last ditch effort to get 'public' involved by showing some bid size. Also if the size was on the offer near the high I would probably be more bullish. But my point was if he had the strength to make it near the high in the first place the odds are still slightly bullish in favour of momentum/trend until proven otherwise. Maybe the buyer has been riding size and plus tick bidding up to this point - or maybe it's near the low and big bid reloads are getting taken on an offer negative - i dunno. For my style I would want more info before taking on a position. Too many variables to base a decision just on that. I'll go long, you go short and if bid keeps reloading on a plus tick I win. If bid dries up and .99 becomes resistance you win.

The specialist, floor broker, or properly coded algo strategy would never flash big/offer with that size. It must be a stale order, a typo, or someone throwing the rest of his order. I see it dozens of times in many stocks (small and mid cap), the size almost always gets a hit except open and close times, but that's a different story. And I never saw a size refresh. The specialist may post reserve liquidity of any size, but I haven't see it more that 1k. Would you show your hand?