Last week’s TICK animation as you will see below, has detected institutional trader buying on May 29th 2012, and institutional trader selling on May 30th 2012.
At first thought, it’s tempting to view institutional buying, then selling only a day later as natural market participants response to breaking economic news both in Europe and the U.S; however, this view is problematic from a logical perspective.
Institutional traders have access to data both in terms of market orders, and in news stories way beyond what the amateur trader has. A group of retired CIA economists run a squawk box service for what is rumored to cost over $1 million dollars per year. This squawk box involves the installation of hardware equipment in the offices of institutional trader clients. It is rumored that this squawk box often delivers news events that impact the stock market’s direction 24 to 48 hours before mainstream news disseminates information to the public. This is why many institutional traders wash out in the stock market when they attempt to quit their day job and trade from home.
To view institutional traders through our own primitive understanding of the stock market is not logical. We know they have access to market makers, stop and limit orders, high frequency trading platforms, the squawk box, and more. To reason that institutional traders were bullish on May 29th, 2012, then bearish a day later on May 30th 2012, is a silly proposition. Just because amateur traders can and do change their mind a day later, that does not mean that institutional traders do the same, especially when they knew of the bad jobs numbers on Friday as early as Wednesday of last week.
A more logical conclusion is that institutional traders created and set a Bull Trap, also known as a Bearish Island Reversal on May 29th and
May 30th 2012. Such a trap is impossible for amateur traders to create. It involves the dissemination of false information which was the Consumer Sentiment report on May 29th 2012.
Whether you agree with this somewhat paranoid view of institutional traders or not, I challenge you to watch the video below with an open mind. Consider all possibilities and then come to your own conclusion.
Song: On the Hunt
Album: Wall Street – Working On the Edge
Artist: Lance Jepsen
Available on iTunes Now at http://itunes.apple.com/us/album/wall-street-working-on-edge/id529290850