Congratulations on your decision to download this eyeopening report. When you’ve finished reading this report your opinion of the stock market will not be the same! To appreciate and fully comprehend why Joel Pozen’s trading system is so valuable to your ability to create wealth as a trader you need to know how the stock market is manipulated by ‘the insiders’ for their own benefit.
In this guide Richard Ney explains how insiders use price to influence the actions of traders to suit their own inventory objectives. You will learn that the stock market is nothing more than a merchandising mechanism for the few to transfer money from the many. Mr. Ney shows you in great detail how the insiders/professionals lay the groundwork for most traders to act in a manner that is contrary to their financial best interest. This is how the professionals transfer huge sums of money from ‘the many’ to themselves every day. The stock market is set up to transfer as much money as possible to the few, from the many, in the least amount time. This practice worked 150 years ago, is in full swing today and will work 150 years from now!
Once you understand how trading works from the viewpoint of the professional trader you will have the basic knowledge necessary to take full advantage of Joel’s system. By tracking the professional’s movements, like footprints in snow, you can pattern your trading activity to their manipulations and create wealth for yourself.
Joel received this guide in 1990 when he took Mr. Ney's course. Not only did Mr. Ney call the 1962 market crash for which he made the cover of Time magazine, he called every subsequent crash until his death in 2004 using this very knowledge. Once read, you will know what the insiders know and what the vast majority of investors will never see!
POCKETBOOK GUIDE TO THE
HABITS OF PROFESSIONAL TRADERS
By Richard Ney
To know your adversary, you must know his customs; to understand the influence that insiders/professionals exercise over the market, you must be able to identify the practices they employ to rig stock prices. The interdependence of such underlying functions as insider/professional short selling, of public supply and demand, of volume as it interacts with price, along with the Dow industrial average and the role of the media, is the foundation for the insider’s/professional’s ability to consistently maximize his profits. You must understand these practices and processes if you want to analyze actual market events at a level of critical awareness that enables you to maximize your own profits.
Manipulation of Price Enables Insiders to Control the Behavior of Amateurs Recognizing that the investors must be provided simple solutions for complex investment problems, the Exchange has conditioned them to respond to the surface appearance of price action. If insiders/professionals want investors to buy stock, they simply raise stock prices sharply. This creates demand. If they want to cause massive selling, they drop stock prices precipitously. It is merely a problem in engineering. The significant function and underlying objective of such price action is, of course, to serve the insider’s/professionals’ inventory needs. In the course of a rally, therefore, insiders/professionals supply public demand by unloading their inventory and then selling short. By precipitating a decline, insiders/professionals are able to use the ensuing public selling to cover their short sales and to accumulate stock for their trading and/or investment accounts. Since the insiders can predict the behavior of the public when they raise or lower stock prices, they have only to decide how they wish investors to behave. How they wish investors to behave will depend on the disposition of their inventory and whether they wish to advance stock prices in order to dispose inventory or lower the stock prices in order to accumulate inventory. It might be easier for the investor to envision this process if he places it in the context of a merchant:
1. Once the insider has accumulated an inventory in a stock in which he is registered at wholesale, his objective will be to rally prices in order to divest himself of this inventory. 2. Having sold this stock at retail, he will want to lower stock prices to wholesale in order to re-accumulate a new inventory of this stock. It should be made clear that there is no specific price in any stock that can be consistently called wholesale or retail. A price of 80 in DuPont, for example, would be wholesale if the insider buys stock at that level with the intention to sell at 90; 80, on the other hand, could be retail on another occasion if the insider shorts stock at 80, then drops the price to 70. Obviously, the insider’s prime objective is simply to sell any given block of stock at a higher price than that at which it was bought. It is important to note that in lowering stock prices from retail to wholesale, the insider’s profit incentives insist he must not carry down to wholesale price levels the stock he must buy from investors at what are still retail price levels. In order to observe this requirement, therefore, once he drops stock prices, causing public selling, he must rally prices until he can divest himself of that inventory before continuing to lower levels. Thus we see that when the insider’s long-term objective is to lower stock prices to wholesale levels, the techniques he will employ will favor a course of action that enables him to conduct a continuing series of declines followed by advances. He will tend to avoid straight-line decline, which could precipitate heavy selling, thereby causing him to acquire an inventory that he would be able to dispose of only in the course of what might have to be a long-term, rather than short-term, rally. Thus, in a course of a routine decline of 100 to 200 points in the Dow, as insiders trend stock prices lower, they will generally advance prices as often as they drop them, the difference being that the amounts of the declines will be, on balance, greater than advances. Naturally, when the insider wishes to conduct a major rally, he will either conduct a long period of accumulation at a low critical price level or he will employ a sharp straight-line decline as he rushes toward a bottom. It is in the fear engendered by a sharp drop that he accumulates the largest amount of stock possible in the shortest time because of the “panic selling” that always results when the market drops 200 or more points in two or three days.
How Insiders Use the Short Sale to Their Advantage
Whether it is a move toward wholesale or retail, the short sale enables insiders to determine the short, intermediate, and long-term price objectives of their stock. Utilizing the short sale, insiders in active stocks like General Motors, Eastman Kodak, or General Electric, for example, can halt the advance or decline of their stock at whatever price they wish. The insider employs his short sale in the context of the following process: 1. His objective is to accumulate stock at wholesale and then rally stock prices. 2. By rallying stock prices he stimulates public demand for his stock. The larger the price advance, the greater the demand he stimulates. (More often than not, this demand will occur the day following the advance.) 3. Once public demand has enabled him to dispose of his inventory at retail price levels in order to supply additional demand he then sells short at what are oftentimes even higher retail price levels. 4. Since the profitability of his short sales depend on a subsequent decline in his stock, he will tend to limit the extent of any additional advance beyond the price levels at which he sold short. For practical purposes it can be said that once he begins to sell short he will try to limit his short selling (depending on the price of the stock) to within a two- to five-point range. Once he halts his stock’s advance, demand soon thereafter begins to dry up.
5. When this happens, the insider is in a position to begin the movement of his stock’s price toward wholesale price levels. 6. As his stock declines from its high, he may encounter heavy public selling. He can then use his short position to absorb that selling by short covering. We must reconcile ourselves to the fact (and learn how to exploit it) that the insider is able to control both advances and declines through the medium of his short selling.
Controlling Price by Insiders is Critical to Influencing the Amateur Demand for Stock Nothing reveals the insider’s inventory objectives more conclusively than the manner in which price is used to influence volume. Most investors take no account of the implications of different volume characteristics that exist in one stock or between one stock and another. To the average investor the price of a stock is all that matters. To the insiders, however, the function of price is the intercourse it has with volume. A stock’s volume characteristics, therefore, are the means by which
the investor may determine that a change is taking place or about to take place in that stock or in the internal character of the market. The higher the insider advances the price of , say, a stock like DuPont, from 60 to 90 in the course of a rally, for example, the greater will be the demand or volume that this insider will be able to produce for his stock. If the insider raises the price substantially, he will also expect to increase the volume materially. Once again we come to a conclusion fundamentally different from that now held by investors i.e., it is not demand that causes rising stock prices but rising stock prices that cause demand. It is the demand that results from rising prices that enables the insider to unload the greatest portion of his inventory at the most profitable price levels. The exact reverse would, of course, hold true in the course of a decline from 90 to 60 in a stock like DuPont. The insider would be able to accumulate the greatest amount of stock as his price declined to the 60 level. During those rare moments when investors do think quantitatively about the rise and fall of prices, their beliefs are, naturally, opposite to what is actually the case. Hence they consider it ominous when stock prices decline on heavy volume and assume the decline is temporary when it is on light volume. What the investor must recognize is that rather than foreshadowing lower prices, heavy selling ultimately causes prices to advance. When insiders trigger heavy public selling they of course are buying. Since they will not wish to carry this stock to lower price levels, thereby incurring a loss, they will advance stock prices to unload this inventory at a profit. It is not only when they are able to decline on light volume that they can afford to carry the decline to lower price levels. If, for instance, the insider in DuPont is in the process of dropping his stock from 90 to 80 and incurs heavy selling as he reaches 84, he will be obliged to rally prices back up to 88 or higher to divest himself of this, he can then proceed back down through that same territory to the accompaniment of lighter selling, meaning lower volume. Thus it is that the insider’s objective is to raise or lower prices on light volume until he reaches the price objective at which he wishes to see heavy volume. It is for this reason that the appearance of big blocks consistently defines the short, intermediate, and long-term reversal points in stock prices. If, for example, the insider wishes to lower prices on light volume but instead incurs heavy selling at, say, the halfway point toward his downside price objective, that volume will manifest itself as big blocks , at which point he will invariably reverse his direction in order to rally his prices to unload that inventory. When he does this, big blocks again define the upper limits of the price level at which he will once again
reverse the trend in order to resume decline. Big blocks at the tops and bottoms of all moves become larger and more frequent depending on the duration and how precipitous the move is.
Insiders Know How Amateurs Will React to Price As the reader advances his knowledge of the insider, he will observe that in the course of a major rally or decline, volume will increase as stocks move toward or just through what I refer to as their “critical numbers.” Big-block activity is localized around prices like 20, 30, 40, 50, 60 because of the way exponentials of 10 are charged in the investor’s mind with subconscious associations. Man’s ten fingers have exercised a tremendous influence over him. For example, ten is used as the base of our numbers system. Many different languages including the Semitic, Mongolian, Indo-European and most primitive cultures employ different words to represent numbers up to ten; beyond ten they all employ some compounding principle until they get to one hundred. This is referred to as the “decimal system.” The upshot of its existence is that men tend to think of numerical progression in patterns of 10 i.e., 10, 20, 30, 40, 50, etc. There is also another classic way of looking at numbers. It is called the “vigesimal system” and employs a base of 20. The people of many countries, the United States included, who employ the decimal system also employ the vigesimal system. Thus we will say “a score of men” for 20 or “two score years” for 40; the Gettysburg Address begins with “Fourscore and seven years ago our fathers….” The French also use 20; the French word for 80 is “quatre-vingt” (4 x 20). The point of this is that the investor’s perception of his environment and his response to it are quite often ruled by a compulsion to conform his activities to sets of numbers in terms of the manner in which the decimal system or the vigesimal system has come to influence him. In short, it is precisely for this reason that insiders have learned that there is a certain predictable pattern investors follow in buying and selling is based on the legacy of what I refer to as the “numbers theory.” The evidence of this, as I previously mentioned, is the striking volume of patterns that tend to occur at the multiples of 10. Thus insiders tend to base the manner in which they manipulate their stock prices on the most ordinary of plots. If a stock is dropped from, say, 70 to 60, of the investors who sell that stock during the declined, a greater percentage will sell near the 60 level than anywhere between 70 and 60.
Investors naturally have no idea that the reason the impulse to sell at 60 is much stronger than 65 is that they are doing the bidding of an instinct that is older than the pyramids. Nor do they realize that misfortunes surrounding their investment decisions are greatly caused by the consistency with which insiders are able to exploit the manner in which investors’ number instincts cause them to act. For example, a insider will drop his stock’s price to a critical number, acquire the increasing amount of shares that are sold to him as he approaches this price level, and then, having cleaned out his book down to the critical number (30, 40, 50, etc.), he will launch a rally that oftentimes carries the stock to just under or just above another critical level (60, 70, 80, etc.). Whether he stops just under or just above the critical level depends on the amount of buy or sell orders he sees on his book just beyond the critical number and what his objective is at the time. In the course of a major rally or decline, insiders move price like a pendulum back and forth across the critical numbers until, because of the action of price, the action of volume either subsides or increases dramatically, thereby moving the market into areas of new definition, from bear to bull or bull to bear.
Insiders Lead Amateurs Around Using the Media and the Dow Jones Industrial Average In defining the instruments employed by insiders to achieve their ends, we should not overlook the distortions of reality created by the Dow Jones industrial average. Employing daily announcements about this average, the media bullies investors into mass movements in and out of the market. When I entered the securities business, I assumed I understood the manner in which the DJIA was utilized to express the health of the market. I assumed it was an index that consisted of a group of 30 stocks, the sum of whose advances and declines, when they were plotted at the end of every day, every week, or every month, gave the investors a fairly accurate picture of what was happening in the market. Several years passed before I realized that the assumption was misleading. I understood more clearly the function of the Dow and its importance to the Stock Exchange’s processes when, after a sharp advance of more than 100 points in the Dow, I observed that of the 30 stocks in this average, 6 were down, only 5 had advanced more than 6 to 7 points, and in this group, only one had advanced more than 7 points. Yet listening to the conversations of others, many of whom were
wealthy investors, one might have assumed that their blue chips had risen 20 or 30 points. To understand the function of the Dow, the investor must look at it from the point of view of the Exchange insider who is constantly mindful of his duty to indoctrinate investors in two ways of analyzing events and taking actions which are dependable for the achievement of the insider’s point of view. An index like the Dow brings it all together, since it has the ability to create herd enthusiasm on the one hand or panic on the other. It is the perfect tool for creating emotional rather than logical reactions. Although a 100-point rally in the Dow may mean very little in terms of the individual stocks in this index (it represents an average gain of 2 1/3 points in each of the 30 Dow stocks), the advance of 100 points creates a grip on the investor’s emotions that distorts his thinking regarding the function of the rally. The Exchange discovered long ago that because investors assume that an important move in the Dow corresponds to an important move in all stocks, like the dogs responding to Pavlov’s bell they can be easily persuaded to leap into action when this index dramatically advances or declines. To counteract this, the investor should keep in mind that while most stocks tend to rise and fall with the movements of the Dow a 17 point in the Dow will often correspond to an advance of less than 1 point in the NYSE Composite.
Insiders Maximize the Benefits of Controlling the Market by Orchestrating Their Acts It is virtually impossible for the investor to solve the problems of timing until he learns to differentiate and describe the movements not of the Dow but of the individual stocks that comprise the Dow. In so doing he will come to appreciate how Dow insiders work together as a group, exercising their power through consensus, harmonizing their movement like so many musical instruments to produce the market’s full orchestration. Like the musicians in an orchestra, the insiders who conduct the movements of each of the Dow stocks work on behalf of their own interests while at the same time working for the fulfillment of the objectives of the system as a whole. This could well mean that while DuPont is advancing to compensate for the decline in other stocks, some insiders in the Dow would, so to speak, be sitting with their hands in their laps until their moment came to perform.
And although the insider in General Motors may have solved his inventory problems on the upside at the top of a rally by establishing a major short position that will carry him profitably to lower price levels, if necessary he will at the market’s opening raise the price of his stock, as will other Dow insiders, in order to help other Dow and non-Dow insiders divest themselves of their inventories. Thus the insiders in four or more Dow Stocks may move to within two to three points of their highs, where they will wait until the prices of other Dow and nonDow stocks have also moved within striking distance of their highs. Then at what is obviously a prearranged signal, most insiders will simultaneously launch their stocks toward their highs. This will then bring in the crescendo of investor demand that enables insiders to establish major short sales before dropping stock prices. In order to rationalize such an advance in the public mind and to provide it with the semblance of legitimacy, this event can be timed to coincide with an economic or political announcement investors will assume his major bullish implications for the overall market.
To Be Effective Insiders Must Act in an Identifiable Manner Known as Patterns It is only by grasping the ideas implicit in pattern recognition that the investors can begin to understand the direction in which insider intend to move their stocks in order to assure the fulfillment of the goals of the unit as a whole. At the same time, only pattern recognition provides our educated intuitions with an understanding of the goals of the unit as revealed by the simultaneous interplay of price and volume in each of the thirty Dow stocks. It is this interplay that translates itself into recognizable patterns or mosaics that tell us what the insider is planning and what his stock’s future pattern can be expected to look like. This information cannot be gathered from watching the Dow, since Dow does not prescribe the movement of the thirty stocks; rather, it is the thirty stocks that prescribe the movement of the Dow. The Stock Exchange is able to command because the information provided investors by the media invests it with the apparatus of control. More from ignorance on their part than from a realization of the clear and conscious intent on the part of their publishers, most of the writers who prepare an analysis of daily market action do so from material prepared for them by Stock Exchange sources and relayed to them through the various wire services.
This information is of great practical utility to the Exchange, for it is well structured and integrated into the investor’s emotional life. The material that is most effective in the formation of investor opinion is always furthest from reality. In consequence the public is persuaded to believe that the market advanced because of a high short interest or a lowering of interest rates. On the other hand they will become encouraged to believe it declined because of an increase in the wholesale index or because of “profit taking by investors.” It is therefore not surprising that investors always look for solutions that do not correspond to reality. Pattern Recognition Enables You to Protect Yourself and Level the Playing Field Investors are easy marks for the seeming logic of half-truths and judgments. Thus it is a simple matter for the Exchange to move them in directions contrary to those in which investors would like to go. By the same token the media’s unexamined premises lead investors to conclusions that are at a great distance from what is in fact occurring on the floor of the Stock Exchange. The only news that’s fit to print is the official proclamations of the Stock Exchange or the semiofficial comments (what “brokers say”) of its surrogates. Thus do the media grant the Stock Exchange establishment “squatter’s rights” over the expression of opinion?
Fascinating isn’t it! To think that the market doesn’t ebb and flow based upon actual financial factors but is moved about so professional traders can buy and sell their inventory at your expense. Insiders rake in billions every day at the expense of the many!
While you can’t change how the market works you can “piggyback” the ‘professionals’ movements. Joel’s system will show you exactly how to do this over and over again.
Get Joel’s system today and start learning how to create the wealth you want so you can have the lifestyle and security you deserve! Visit us at www.BestTradingStrategiesRevealed.com Email us at
[email protected]
