[sourcery]

There are three central problems for market manipulators:

1. Open positions cannot be acccumulated and held forever. The positions have to be closed, and that process will take the market back in the opposite direction.
2. For markets with high volume and large capitalization, the amount of cash required is daunting--even when using highly-leveraged futures contracts. For one thing, everyone who trades futures has access to the same leverage--the margin requirements are the same for all players.
3. Buying large quantities simply fills some (or all) of some set of open limit orders, whose limits were low enough to be filled. Very large buys will raise the price not by changing the psychology of the market, but simply by stepping up the ladder of the limit prices of the open orders, in order to fill the large at-market buy order. However, since market psychology was not changed, the price quickly falls back to where it would have been. Prices will also fall back because a) rising prices will convince more professional/commercial traders to take profits, and b) all price moves are always at least partially retraced.

The public always becomes more bullish as prices rise, and more bearish as prices fall. This is why people have the illusion that market manipulation can work, because they imagine that the market reacts the way the public does. But that is not the case. The public is most bullish when prices are at their highs, and most bearish when prices are at their lows. Increasing the bullishness of the public is great way to cause prices to fall.

Professional traders need buyers when they want to sell, and sellers when they want to buy. That's why the professionals sell when the public is in the mood to buy, and buy when the public is in the mood to sell. It's like the famous answer of the gangster as to why he robs banks: because that's where the money is! When rising prices make the public bullish, the professionals spot a good selling opportunity. And down the market comes, with the public "buying the dips" and the professionals happily taking advantage of the liquidity to close their positions. And prices move in synch with the actions of the professionals and commercials, who control the price because a) they are the "strong hands," who can afford to be patient, and b) because of the volume of trades they can execute.

[arete]

the professionals and commercials, who control the price because a) they are the "strong hands," who can afford to be patient, and b) because of the volume of trades they can execute.

I understand that the commercials are now net long in the market. Party on!

Richard W.

[zechariah]

There are three central problems for market manipulators:

This makes perfect sense.

And prices move in synch with the actions of the professionals and commercials, who control the price because a) they are the "strong hands," who can afford to be patient, and b) because of the volume of trades they can execute.

See, this is what bothers me. Why don't your "three central problems" for market manipulators apply to the the "strong hands" whom you claim are able to "control the price"?

[z]