The Black Hand
by Jerome "Mel" Hickerson
Since we have some extra time off with the long weekend, let's take the opportunity to dissect yesterday's action in greater detail before we take up the matter of the job's report later this weekend.
Thursday was an interesting day; it's always interesting when Toto pulls back the curtains to reveal the man behind. I am not big on blaming the market action on manipulation but there are times it is just as silly to deny manipulation as it is silly to blame everything on it. And yesterday the evidence is startlingly clear. Let me begin to lay out the case and you can be the judge.
As mentioned in the previous report, the intraday high came at just around 10am. For several hours thereafter the SPX meandered within a three point range mostly sideways. Your Honor, we begin our prosecution by examining the events beginning at noon.
Out timeline begins with the index about 0.10% off the high of the day, up 0.81% for the day. At noon, 77% of all transactions are taking place at the ask; bidders are raising bids to get filled. The SPX advance/decline line is at +364 with 26.6% of the SPX at their highs for the day. Our proprietary measure of institutional activity is strong at +356. Our MEL indicator is at +12.36 and the market is strong. We have two arrows up on our board (MEL and C) but the four other arrows are all sideways. The market is strong but not a runaway.
The lunch hour is quiet with sideways trade. As 1pm rolls in, MEL has declined to 10.8, but the SPX is still trading at +0.73 for the day. Data on the inside is beginning to throw more warning signs. Over the lunch hour, 63% of trades were made at the ask; down 14% since noon. The SPX Adv/dec line has dropped a bit to +319. But our measure of institutional activity, which was +356 at noon (and as high as +403 during the lunch hour) has now dropped suspiciously to +199. We now only have one up arrow on our board (MEL) and two down arrows (Breadth and Divergence). Warning flags are appearing but no evidence of the Black Hand.
Now, Ladies and Gentlemen of the jury, we advance our timeline 15 minutes. It is 1:15pm. The SPX is up +0.71 for the day; the index is not showing any outward appearance of what is beginning to show internally. Over the previous hour, transactions are now taking place 52% of the time at the ask; this is an 11% drop in the 60 minute figure within 15 minutes. Someone is dumping rapidly into the market strength. Our measure of institutional activity has dropped from +199 to -279 within 15 minutes. Only 13.8% of the SPX is at their highs of the day. Our MEL indicator has dropped quickly to 4.95 and we have no upward arrows on our board with three pointing downward (Breadth, Divergence, and Trend.) The action at this point is troubling but not yet alarming.
It is now 1:30. We have reached the scene of the crime. The index is up +0.76 now, moving upward from 1:15pm. Breadth is moving slightly upward. SPX components at the high of the day have increased to 17.6%. Even the SPX Adv/dec line has moved upward to +325. But institutional activity is moving into bearish territory as our indicator is now at -380. The Black Hand is unloading even harder into the strength of the market while retail traders are buying and being led to slaughter.
Jumping ahead to 2pm, the crime is in full swing. The index has dropped to +0.49. Only 6.4% of the SPX are at their highs. Institutional selling has reached the intraday peak at -543 on our scale. We have four arrows down on our board. MEL has dropped all the way to +0.33. Over the next 45 minutes the SPX moves down to +0.17 on the day while volume surges (see chart.) Institutions are heavily unloading.
By 3pm, it's mostly over. Institutions accomplished their mission. With no sellers left, even with very few buyers, the indices crawl back upward.
Evidence of the intraday trend: The largest increase in relative volume came between 2:30 and 2:45 when relative volume increased 46.8% while the SPX was dropping -0.23%. The largest drop in relative volume came between 3:00 and 3:15 when relative volume dropped -44.1% while the SPX was flat.
Thursday saw computerized selling at its finest. Billions of shares were distributed near the 52 week high without causing more than a one hour blip in the market; I say it's pure genius at work. You make the call. The prosecution rests.
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"Mel"
