Quote from illiquid:
Do you really need a specialist to blame? Watch the price action on any electronic market and you can pick out the same head-fakes, shakeouts, and other modes of deception as seen at the NYSE. When everyone is competing for the best possible price, the games just evolve naturally.
As much as I hate specialist scum and my favorite ones are dead ones or those in prison, I have to agree with you when it comes to sector stocks. In other stocks I used to have favorite specialists, like WLT back in the day or FSH, MHS, CIT and HRB back back in the day, but once the mooks & Wall Street gets to them, the specialists turn to pure bastards, so f**k them, their families and the horses they rode in on.
X, NUE, AKS, OS, LEN, PHM, HOV, DHI and TOL/RYL/CTX ( to an extent) are electronically dominated stocks which are controlled by hedge funds, traders, computers and index arbs. The specialists in them do nothing more than scalp spreads and pinch daytrader orders for pennies or whatever they can. Maybe on occasion when there are unique buyers or sellers and sector action is not significant & correlated, the specialist T&S may become significant but overall these guys simply do not have the key order flow.
If you get faked by those size flashes in X or NUE, you're either a newbie or just too stupid to catch on to the fact that size in those stocks means nothing, be it on Open Book or the floor or even ARCA. Tape reading those stocks, at least for me, gives false signals because there is nothing to taperead besides the spread scalping by the specialist. Of course, a confirmation by the tape is always welcome, like a buyer/seller stepping in on the floor instead of fragmented size in OB/ECNS, but that is not primary at all, sometimes even insignificant.
Every time X flashes one of those 50k bids and Im long, I get ready for a shake out and put up bids on ECNs for the fake exaggerated spread downs as the mook shakeout proceeds (if the key indicators still confirm my long position).
I do not touch oils or coals or certain homies like KBH because of the specialist slippage of scalping spreads (30 cents is too much to give up to specialist scum in this market). However Im pretty sure those stocks are also primarily controlled by hedgies and index arbs, hence there really is not anything to taperead unless there is a unique buyer/seller.
Think what you want, I just noticed that I stopped paying that much attention to the tape and have had good results with playing sectors. Much higher average profits and a much better net profit/commission ratio. Sometimes I do not even bother trading nonsector plays with tapereading because it's a worse risk/reward ratio. Way too many mooks & tapereaders to fight with, along with the specialist and a decreasing institutional participation.
P.S. Steve stop wasting ur time with Coolwhip
