"I can't find the source, but about 97% of the dalily volume of the US markets is attributed to short term speculators, and only 3% to long term investors. " um, no how do u define "US markets"? either way, it bogus. if u are talking the equity markets, it is 100% false. if you are talking the futures markets, it is 100% false. the reason you can't find a "source" is because this statistic is not only bogus, but astoundingly inaccurate.
"Very roughly, this means that the 3% of the daily variance is explained by the underlying economical factors, and the rest 97% are the gyrations of the speculators to take money from each other" not even 'very roughly' your initial premise is false. the conclusion is also bogus.
Great thread, whitster i believe your wrong on this - paul rotter does like 10-20% of the volume on a paticular european equity index futures contract (i believe its the DAX) - not sure though. And remember Borsoleenii (incorrect spelling) - he did 10% of the volume on SPX futures - and he said 20% of the guys (speculators) do 80% of the volume - he should know. All you have to rely on is anecdotal evidence like this - no one really has done any 'studies' on anything discussed on this thread.
Manipulation happens all the time. Guys have cornered markets many times in the past. Manipulation was Livermore's 'edge' he cornered just about every market he traded until the SEC made it illegal then he blew his brains out. Remember the guys who cornered silver in the 80's and blew up when everyone found out. Remember Paul Hunter, who ran up nat. gas prices with his buying and got smoked once word got around. Japan intervenes all the time in the Yen market. Central banks kept gold depressed for a long time. You got a be a complete piker idiot to to (1) not know manipulation happens and/or to (2) complain about it. Cause if you know how it happens and when it happens, no need to complain - you just get rich.
He was a big guy in the spooz, but Lewis Borsellino wasn't all that in the grand scheme, he only made $1.3mm on October 19, 1987. He was banned from the merc for welching...if you walked by the S&P pit it was a wise move to cover your badge when walking by him. PS - The Hunt family is alive and prospering...they might be famous for the silver trade but if there's ever been a family that knows money, it's them. http://www.huntrealty.com/ http://www.huntoil.com/ http://www.huntrefining.com/ http://www.huntpower.com/ http://www.huntmx.com/ http://www.huntbioventures.com/ http://www.huntventures.com/ http://www.huntpeg.com/ http://www.huntssg.com/ http://www.hoodoolandandcattle.com/
Yes 3%/97% ratio of long term speculative money to short term speculative money may seem a bit to steep but I'm sure it is possible but perhaps 20%/80% is closer to the truth, but the bottem line is that a small minority of guys do most of the volume. Long term speculative money are the Mutual Funds - who are long only and fully invested for the most part. When the get inflows, they have to buy and when they get redemptions they have to sell. But my question re: mutual funds is: can they trade futures, options, or other derivatives at all? Aren't they required to stick to the underlying depending on whether its a stock or bond mutual fund? They can't use leverage and they can't short as far as I know so I'm wondering if they can trade derivative products? If they can I guess they have to provide full disclosure on their positions. Who here knows for sure?
Re: hunt family. That's funny, yeah I knew the brothers were trading their inheritance and then blew out and declared bankruptcy - but I guess they had some money the govt. couldn't touch.
Bottom line is never play a game of chicken with guys that have more money than you and are a lot more possessed by fear and greed than you.
you made the extraordinary claim (3%/97%), so the burden is on you to provide the evidence. that's point 1. i know it's wrong, but the burden is on you to prove it's right volume by LTFP's is hyoooge. volume by insurance companies, mutual funds, etc. is hyooge. i can't believe how incredibly naive some people are. also note that in many futures contracts (corn, etc.) a hyooge part of the volume is HEDGERs/Commercial, NOT specs. they are hedging based on what they are going to deliver, or need to purchase in the futre. the OP just has a fundamental misunderstanding of the market. also, in regards to the question of mutual funds. it doesn't MATTER that mutual funds trade largely underlyings. moves in the underlyings necessitate moves in the futures. see: progrm arb trades in regards to the first point, i'll say it again: see COT reports & PLUHEZZ get a clue
The truth will be told in Q1 and we will see what the market really does want to do but it has one simple job in the short run and that is humble us all. Do not respect the market and it will teach you respect the hard way. I want to short this market has much as the Perma bears are trying to support their cause but I can not do much until this uptrend channel is taken out and sign of weakness are present in volume. My feeling is that dollar weakness is not healthy for our US market as it causes foreign investors out of our market in the long run because of currency risk and unstable leadership and along with fed confidence. The puzzle is getting harder to put together and i wish all bull and bears good luck. As a short term trader I am just looking for the path of least resistance. That seems 100% easier than figuring out this intramarket analysis, but is sure is simulating. Trade them up.