In every profession, there are probably a dozen or two major rules. Knowing them cold is what separates the professional from the amateur. Not knowing them at all? You will probably lose. What the professionals and the securities regulators know and understand, which the rest of us do not, is this.
"RULE NUMBER ONE: ALL SHARP PRICE MOVEMENTS -- WHETHER UP OR DOWN --ARE THE RESULT OF ONE OR MORE (USUALLY A GROUP OF) PROFESSIONALS MANIPULATING THE SHARE PRICE."
In order to make these market manipulations work, the professionals assume:
(a) The Public is STUPID and
(b) The Public will mainly buy at the HIGH and
(c) The Public will sell at the LOW.
Therefore, as long as the market manipulator can run crowd control, he can be successful.
Let's face it: The reason you speculate in such markets is that you are greedy AND optimistic. You believe in a better tomorrow and NEED to make money quickly. It is this sentiment which is exploited by the market manipulator. He controls YOUR greed and fear about a particular stock. If he wants you to buy, the company's prospects look like the next Microsoft. If the manipulator wants you to desert the sinking ship, he suddenly becomes very guarded in his remarks about the company, isn't around to glowingly answer questions about the company and/or GETS issued very bad news about the company. Which brings us to the next important rule.
"RULE NUMBER TWO: IF THE MARKET MANIPULATOR WANTS TO DISTRIBUTE (DUMP) HIS SHARES, HE WILL START A GOOD NEWS PROMOTIONAL CAMPAIGN."
Ever wonder why a particular company is made to look like the greatest thing since sliced bread? That sentiment is manufactured. Newsletter writers are hired -- either secretly or not -- to cheerlead a stock. PR firms are hired and let loose upon an unsuspecting public. Contracts to appear on radio talk shows are signed and implemented. Stockbrokers get "cheap" stock to recommend the company to their "book" (that means YOU, the client in his book). An advertising campaign is rolled out (television ads, newspaper ads, card deck mailings). The company signs up to exhibit at "investment conferences" and "gold shows" mainly so they can get a little "podium time" to hype you on their stock and tell you how "their company is really different" and "not a stock promotion.") Funny little "hype" messages are posted on Internet newsgroups by the same cast of usual suspects. The more, the merrier. And a little "juice" can go a long way toward running up the stock price.
The HYPE is on. The more clever a stock promoter, the better his knowledge of the advertising business. Little gimmicks like "positioning" are used. Example: Make a completely unknown company look warm and fuzzy and appealing to you by comparing it to a recent success story. The only reason you have been invited to this seemingly incredible banquet is that YOU are the main course. After the market manipulator has suckered you into "his investment," exchanging HIS paper for YOUR cash, the walls begin to close in on you. Why is that?
"RULE NUMBER THREE: AS SOON AS THE MARKET MANIPULATOR HAS COMPLETED HIS DISTRIBUTION (DUMPING) OF SHARES, HE WILL START A BAD NEWS OR NO NEWS CAMPAIGN."
Your favorite home-run stock has just stalled or retreated a bit from its high.
Suddenly, there is a news VACUUM. Either NO news or BAD
rumors. I discovered this with quite a few stocks. I would get LOADS of information and "hot tips." All of a sudden, my pipeline was
shut-off. Some companies would even issue a news release CONDEMNING me ("We don't need 'that kind of hype' referring to me!). Cute, huh? When the company wanted fantastic hype circulated hither and yon, there would be someone there to spoon-feed me. The second the distribution phase was DONE....ooops! Sorry, no more news. Or, "I'm sorry. He's not in the office." Or, "He won't be back until Monday."
The really slick market manipulators would even seed the Internet news groups or
other journalists to plant negative stories about that
company. Or start a propaganda campaign of negative rumors on all available communication vehicles. Even hiring a "contrarian" or
"special PR firm" to drive down the price. Even hiring someone to attack the guy who had earlier written glowingly about the company.
(This is not a game for the faint-hearted!)
You'll also see the stock drifting endlessly. You may even experience a helpless
feeling, as if you were floating in outer space without a
lifeline. That is exactly HOW the market manipulator wants you to feel. See Rule Number Five below. He may also be doing this to avoid
the severe disappointment of a "dry hole" or a "failed deal."
You'll hear that oft-cried refrain, Or the oft-quoted statistic, "Nine out of 10
businesses fail each year and this IS a Venture Capital
Startup stock exchange." Don't think it wasn't contrived. Ditto for the high-tech deal, in a world awash with PhD's.
So, how do you know when you are being taken? Look again at Rule #1. Inside that rule, a few other rules unfold which explain how a stock price is manipulated.
"RULE NUMBER FOUR: ANY STOCK THAT TRADES HUGE VOLUME AT HIGHER PRICES SIGNALS THE DISTRIBUTION PHASE."
When there was less volume, the price was lower. Professionals were
accumulating. After the price runs, the volume increases. The
professionals bought low and sold high. The amateurs bought high (and will soon enough sell low). In older books about market manipulation and stock promotion, which I've recently studied, the markup price referred to THREE times higher than the floor. The floor is the launchpad for the stock. For example, if one looks at the stock price and finds a steady flatline on the stock's chart of around 10 cents, then that range is the FLOOR. Basically, the markup phase can go as high as the market manipulator is capable of taking it.
From my observations, a good markup should be able to run about five to ten times higher than the floor, with six to seven being common. The market manipulator will do everything in his power to keep you OUT OF THE STOCK until the share price has been marked up by at least two-three times, sometimes resorting to "shaking you out" until after he has accumulated enough shares. Once the markup has begun, the stock chart will show you one or more in the volume -- all at much higher prices (marked up by the manipulator, of course). That is DISTRIBUTION and nothing else.
WHENEVER you see HUGE volume after the stock has risen on a 75 degree angle, the distribution phase has started and you are likely to be buying in - at or near the stock's peak price.
Successful short-term speculators generally exit any stock run up when the volume soars; amateurs get greedy and buy at those points.
"RULE NUMBER FIVE: THE MARKET MANIPULATOR WILL ALWAYS TRY TO GET YOU TO BUY AT THE HIGHEST,AND SELL AT THE LOWEST PRICE POSSIBLE."
Just as the manipulator will use every available means to invite you to "the party," he will savagely and brutally drive you away from "his stock" when he has fleeced you. The first falsehood you assume is that the stock promoter WANTS you to make a bundle by investing in his company. So begins a string of lies that run for as long as your stomach can take it.
You will get the first clue that "you have been had" when the stock stalls at
the higher level. Somehow, it ran out of steam and you are
not sure why. Well, it ran out of steam because the market manipulator stopped running it up. It's over inflated and he can't convince more people to buy. The volume dries up while the share price seems to stall. LOOK AT THE TRADING VOLUME, NOT THE SHARE PRICE!
When earlier, there may have been 500,000 shares trading each day for eight out
of 12 trading days (as in the case of Software Control
Systems), now the volume has slipped to 100,000 shares (or so) daily. There are some buyers there, enough for the manipulator to continue dumping his paper, but only so long as he can enlist one or more individuals/services to bang his drum.
He may continue feeding the promo guys a string of "promises" and "good news down the road." (Believe me, this HAS happened to me!) But, when the news finally arrives, the stock price goes THUD! This is entirely orchestrated
"RULE NUMBER SIX: IF THIS IS A REAL DEAL, THEN YOU ARE LIKELY TO BE THE LAST PERSON TO BE NOTIFIED OR WILL BE DRIVEN OUT AT THE LOWER PRICES."
Like Jesse Livermore wrote, "If there's some easy money lying around, no one is
going to force it into your pocket." The same concept can be more clearly
understood by watching the tape. When a market manipulator wants you into his
stock, you will hear LOUD noises of stock promotion and hype. If you are "in the
loop," you will be bombarded from many directions. Similarly, if he wants you
out of the
stock, then there will be orchestrated rumors being circulated, rapid-fired at you again from many directions. Just as good news may
come to you in waves, so will bad news.
You will see evidence of a VERY sharp drop in the share price with HUGE volume.
That is you and your buddies running for the exits. If
the deal is really for real, the market manipulator wants to get ALL OF YOUR SHARES or as many as he can... and at the lowest price he can. Whereas before, he wanted you IN his market, so he could dump his shares to you at a higher price, NOW when he sees that this deal IS for real, he wants to pay as little as possible for those same shares... YOUR shares which he wants to you part with, as quickly as possible.
The market manipulator will shake you out by DRIVING the price as low as he can.
Just as in the "accumulation" stage, he wants to keep
everything as quiet as possible so he can snap up as many of the shares for himself, he will NOW turn down, or even turn off, the
volume so he can repeat the accumulation phase.
The accumulation phase was TOP SECRET. The noise level was deadingly silent. As soon as the insiders accumulated all their shares, they let YOU in on the secret.
"RULE NUMBER SEVEN: CONVERSELY, YOU WILL OFTEN BE THE LAST TO KNOW WHEN THIS DEAL SHOWS SIGNS OF FAILURE."
Twenty-twenty hindsight will often show you that there was a "little stumble" in the share price, just as the "assays were delayed" or the "deal didn't go through." Manipulators were peeling off their paper to START the downslide. And ACCELERATE it. The quick slide down makes it improbable for your getting out at more than what you originally paid for the stock... and gives you a better reason for holding onto it "a little longer" in case the price rebounds. Then, the drifting stage begins and fear takes over. And unless you have nerves of steel and can afford to wait out the manipulator, you will more than likely end up selling out at a cheap price.
For the insider, marketmaker or underwriter is obliged to buy back all of your paper in order to keep his company alive and maintain control of it.
The less he has to pay for your paper, the lower his cost will be to commence his stock promotion again... at some future date. Even if his company has no prospects AT ALL, his "shell" of a company has some value (only in that others might want to use that structure so they can run their own stock promotion). So, the manipulator WILL buy back his paper. He just wants to make sure that he pays as little for those shares as possible.
"RULE NUMBER EIGHT: THE MARKET MANIPULATOR WILL COMPEL YOU INTO THE STOCK SO THAT YOU DRIVE UP ITS PRICE SHARES."
Placing a Market Order or Pre-Market Order is an amateur's mistake, typifying the US investor -- one who assumes that thinly traded issues are the same as blue chip stocks, to which they are accustomed. A market manipulator (traders included here) can jack up the share price during your market order and bring you back a confirmation at some preposterous level. The Market Manipulator will use the "tape" against you. He will keep buying up his own paper to keep you reaching for a higher price. He will get in line ahead of you to buy all the shares at the current price and force you to pay MORE for those shares. He will tease you and MAKE you reach for the higher price so you "won't miss out." Miss out on what? Getting your head chopped off, that's what!
One can avoid market manipulation by not buying during the huge price and abnormal trading volumes, also known as chasing the stock to a higher price.
"RULE NUMBER NINE: THE MARKET MANIPULATOR IS WELL AWARE OF THE EMOTIONS YOU ARE EXPERIENCING DURING A RUN UP AND A COLLAPSE AND WILL PLAY YOUR EMOTIONS LIKE A PIANO."
During the run up, you WILL have a rush of greed which compels you to run into the stock. During the collapse, you WILL have a fear that you will lose everything... so you will rush to exit.
See how simple it is and how clear a bell it strikes? Don't think this formula
isn't tattooed inside the mind of every manipulator. The
market manipulator will play you on the way up and play you on the way down. If he does it very well, he will make it look like someone
else's fault that you lost money! Promise to fill up your wallet? You'll rush into the stock. Scare you into losing every penny you have
in that stock? You'll run away screaming with horror! And vow to NEVER, ever speculate in such stocks again. But many of you still
do.... The manipulator even knows how to bring you back for yet another play.
"FINAL RULE: A NEW BATCH OF SUCKERS ARE BORN WITH EVERY NEW PLAY."
The Financial Markets are a Cruel, Unkind and Dangerous Playing Field, one place where the newest amateurs are generally fleeced the most brutally.... usually by those who KNOW the above rules.
Just as I have a duty to ensure that each of you nderstand how this game is played, YOU now have that same duty to guarantee that your fellow speculator understands these rules. Just as I would be a criminal for not making this data known to you, YOU would be just as criminal to keep it a secret. There will always be an unsuspecting, trusting fool whom the rabid dogs will tear to shreds, but it does NOT have to be this way.
If every subscriber made this essay broadly known to his friends, acquaintances
and family, and they passed it on to their friends, word
of mouth could cause many of these market manipulators to pause. IF this effort were done strenuously by many, then perhaps the financial markets could weed out the crooked manipulators and the promoters could bring us more legitimate plays.
The stock markets are a financing tool. The companies BORROW money from you, when you invest or speculate in their companies. They want their share price going higher so they can finance their deal with less dilution of their shares... if they are good guys. But, how would you feel about a friend or family member who kept borrowing money from you and never repaid it? That would be theft, plain and simple. So, a market manipulator is STEALING your money.
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