In the late 1800’s, Charles Dow and Edward Jones introduced the Dow Jones Industrial Average in an effort to help level the playing field for average investors who were struggling to build their financial holdings. The original Index consisted of companies that were key contributors to the growth of the U.S. Economy. Dow also came up with six tenets of Dow Theory that eventually evolved into what is now known as technical analysis of the financial markets. Dow concluded that by tracking the growth of the companies that were driving the U.S. Economy, you could forecast the cycles of the economy over time with reasonable accuracy.
Charles Dow and Edward Jones focused their attention on small investors who felt they were at a disadvantage when it came to investing, but that all changed after Dow and Jones published the Wall Street Journal on July 8th, 1889. The average American Investor now had a place to turn to for business and financial news, and the paper was written in a style that appealed to novice investors as well. The newspaper’s accuracy and attention to detail of its coverage won its respect and success from the very start.
Fast forward 135 years…
What started out as an opportunity for small investors, the markets have now become a money machine for large corporations and financial institutions who see private investors as pawns that are willingly sacrificed to feed the greed machine.
Manipulation is running rampant, and the manipulators are no longer trying to hide it. In fact, it is happening in full view for the world to see in real-time. Here are just a few examples of what has happened recently:
On Friday, December 6th, three companies had breaking news come out after the close of the market and all three of these companies saw a dramatic spike in the price during the after-hours trading session. Super Micro Computer, Inc. (Ticker: SMCI), Apollo Global Management, Inc. (Ticker: APO), and Workday, Inc. (Ticker: WDAY) all had positive news released almost simultaneously between 4:30 and 5:00 pm ET. While this may not seem like a big deal on the surface, the timing of the news makes this story a much bigger deal.
Have you ever wondered why news, especially earnings announcements, is usually released after the markets have closed, or before the markets have opened? These press releases can easily go out mid-day while the markets are open. But that is not the case, and the reason why the news is not released during the regular trading session is simple. It is easier to manipulate the price when the trading volume is light, while few are paying attention to the price action.
Big Deal #2 – The news on these three companies was released 15 minutes before the cut-off time to exercise the option contracts on the weekly options that expired on Friday. If you are not familiar with option trading, understand that option traders who held worthless short call positions at the close of the market are now at risk of winding up with a short stock position, with no chance of being able to hedge their positions, unless they were quick enough to react in that 15-minute window before the cut-off. The very next day, Saturday, December 7th, brokerage houses were sending out notifications to their shareholders informing them of the new short positions that had hit their accounts due to the assignments on the short “worthless” calls they held at the close on Friday. More on “Exercising Options” found here.
Big Deal #3 – The short Squeeze is on. The vast number of account holders who are short these stocks will now be scrambling to cover their short positions in an effort to avoid or reduce the impact of a margin call. What do you think the “Manipulators” will be doing during this time? Oh, they will most likely be selling out of the shares they bought on Friday before the news came out, but at a much higher price, to those who are scrambling to cover their short positions.
Big Deal #4 – Who authorized the timing of the announcements for Workday, Apollo, and Super Micro Computer? While I do not believe this act was illegal, I most certainly believe it was unethical. I also believe FINRA, and the Regulators need to be called in to investigate this very shady practice of institutional trading off of news releases.
It’s been almost 3 years since FINRA’s Market Regulation and Technology teams wrapped up an extensive project to migrate the majority of FINRA’s market manipulation surveillance program to using deep learning in what is perhaps the largest application of artificial intelligence in the “RegTech” space to date.
It would not take much effort to find out which institutions were buying the out-of-the-money calls on the close, and from there, they can easily track down the time of those trades to see how they correlate to the time of the news releases. Just follow the money, and you will be able to piece this puzzle together very quickly. The next question is…Will the regulators crack down on this manipulation?
If you have been a victim of this kind of market manipulation, this might be a wake-up call for you. Let your voice be heard and petition for change. This kind of manipulation will come to a screeching halt once the regulators change the rules for the timing of news announcements like this (including earnings announcements). There is no reason why this news could not be released during regular market hours (perhaps 12 noon ET).
Below are links to the news announcements mentioned, along with the charts for each company showing the price action that followed the news releases.
08-Dec-24: “Super Micro Wins Key Nasdaq Extension. The Stock Is Soaring.”
06-Dec-24: “Apollo and Workday to Join S&P 500 After Index Rebalancing”
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