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Stock Markets Manipulation

I do not worry too much about the stock markets manipulations.  However, when a stock market manipulation involves the distortion of the price-action, everyone is concerned.  I have high regards for those who denounce stock markets manipulations' price distortions .  This article will help one to comprehend the biggest stock market manipulation.  Let's get started.

What Is A Stock Market Manipulation?

The stock market manipulation is the biggest enemy of all market players.  It is an intent or act to directly or indirectly mislead all stock market players and influence the course of the price action. 

Example Of Stock Market Manipulation

An example of stock market manipulation would be to place a large order to sell a stock at specific price level with no real intention to fill the order, but to scare bullish market players. 

As those bullish investors saw that huge bearish order, they will surely run off and cause the price to fall before the person who is manipulating the markets buys the stock at a lower price with a big smile in the face.  

He has effectively manipulated the stock markets.  The stock markets decline so he can buy stocks at reduced price. It becomes very interesting because as he cancels his dodgy large and scary sell order, bullish traders who initially were scared away now see that the large sell order has disappeared. 

You guess it right.  They will also come back and buy together with the market manipulator.   Those manipulated bullish traders and investors are working for the stock market manipulator.

Please understand that some of those bullish market players were forced to close their initial bullish positions because of that scary fake large sell order.  Some did take losses in the process.  All in all, the manipulator has successfully used everyone 360 degree.

One will agree that the biggest stock markets manipulation is the enemy of all market players.  Of course, I can give many other examples, but I will hold my fire for now.

What Is The Biggest Stock Market Manipulation?

Financial markets manipulations come in different sizes and colors. 

Usually, those who understand how the stock markets work will quickly spot and flag them.  Nevertheless, sometimes, they are well hidden.  In fact the biggest stock markets manipulations are hidden.

One of the reasons why they are hidden is because they distort the assets price or price-action in a way that one does not realise that the price is not reflecting the actual correct current price. 

In most cases, one will be paying more than needed.  For example one is buying a stock in the range $45 and $50 but in fact the correct price range should have been $25 and $30.  

Truly, there is a $20 discrepancy.  One may think that there is no need to worry for it as long as it continues to rise.  To make the matter worst, the biggest stock market manipulation does accumulate over a long time.  It will gradually build up without many knowing about it.  As it builds up beneath the surface, days after days or years, it just blends into the price as if nothing has happened.

During that time, it is business as usual as long as one can safely get in and out without being fried.   It is just like the titanic ship that is doom if one stays on it.  One thing is  certain is that many will lose in the medium to long term if they are not aware of the biggest stock markets manipulation.

All in all, the biggest stock market manipulation is the one that occurs gradually over a long term; and distorts most assets price without many even knowing about it.

At the time of writing this article (June 2020) the financial markets are distorted.  It does not mean that it has started in 2020.  It did start somewhere in 2008.

I will not point a finger at anyone because my intention is to help traders and investors understand more what is the biggest stock market manipulation. 

One may argue and say " it does not affect me now, I do not care."   That is an acceptable opinion, but it is a mistake to think that one was not affected.  Indeed, one has been short changed without knowing it, and one did not even feel it. 

Indeed, financial markets manipulation cause unnecessary losses.  Those who supposed to lose end up making profit, and those that do not deserve to part with their money take losses instead of profit.  Similarly, losses are unnecessarily amplified while true gains become minuscule.  Moreover, those who should still be in their positions are shaken off and the only winners are the stock markets manipulators.

Really, every market player is effectively robbed when the biggest stock markets manipulation is in play.  Professional traders and investors and individual market investors who want to make money in the financial markets should be worried when the assets prices are distorted.

It does not matter whether one is an intelligent investor or sophisticated stock market player.   When the financial markets trading game is rigged, one will not make sustainable gains.  That is why the biggest stock markets manipulation is the enemy of all market participants.

What To Do When One Knows That The Financial Markets Have Been Manipulated?

One must report it to the Securities and Exchange Commission (SEC) in the United States or its counterparts in other part of the world.  Note that the SEC will surely deal with any market manipulation complaint if one contact them from any part in the world.  

The most important thing is that it has to be a genuine plot to transgress the natural course of the financial stock markets.

How To Invest In Manipulated Financial Stock Markets?

One must hedge bullish positions using inverse etfs, put options and holding gold.

One must have defensive and protective measures in place, and be agile like a gazelle.  One must prioritise a short to medium term investment approach; and vigorously protect long term holdings.
I would say that one must have for oneself a set of unbreakable rules set in a stone like the ten commandments that one will be following to avoid being fried like chicken nuggets.

Those that were not complying to the five percent money management rules have to quickly get back into line to reduce large risks exposure.

More sophisticated investors should not hesitate to short financial instruments that are colossally overbought.  In that bearish state, one must combine the technical and fundamental analysis without bending the rules.

A more conservative investor can begin pruning his positions, banking or securing gains without taking any more new large and long term positions.

To be frank, one must adopt the same attitude as a person who hears a fire alarm.

One must adopt a zulu fighter attitude of smash, grab, run and hide.
I mean legally without breaking any rules.  One is always ready to secure gains and cut losses before they grow in a manipulated stock market.

Who Has Been Indirectly Manipulating Stock Markets?

All central banks without exception have been indirectly manipulating the stock markets since 2008.  How do they do it?

They use QE (quantitative easing or money printing).  The free money printed by all central banks flow into the financial markets.  The most recent one is during the corona virus.  A free give away or any free money that is pumped into the business world but was not earned will distort the financial markets.

Usually, people will typically react and say " hey George what are talking about?"  Oi, show me the distortions or bla bla bla.
Indeed, it is sleek and sneaky to the point that one can not notice it.  That is the beauty of an ugly stock market manipulation.

It is exactly the same thing as a company that is making money from other activities that are not its core business.  That is exactly a free money not earned.  Yes, it is helpful, but if it continues on that road alone, it will be a perfect candidate for short sellers.

The point I am making is that in a short to medium term a smart investor who understands the biggest stock market manipulation can profit in the financial markets knowing that the stock markets are distorted.   It is only the free money that pops it up bit.  

That smart investor also knows that if businesses are propped up by central banks but their future does not look brighter, they will not survive in the long term.

The activities of central banks though in the short to medium term helpful can become a major factor in distorting assets prices in the long run especially if they keep interrupting the stock markets cycles.

When stock markets cycles are turned upside down, every market player is at risk 100% if they are still holding onto their positions without defensive measures. 

Talking About Speculation In Distorted Stock Markets

The only good thing about highly manipulated or distorted assets prices is that it allows a high level speculation for short term gains.  

It means that one does care about the long term prospect of businesses and the global economy.  One does not care about the financial markets and its players.  It is just the wild wild west jungle life of smash, grab, run and hide. 

You get the picture?  Surely, a stock market dominated by speculators has no real future.  It is in fact one sided stock market that is either full of bears or bulls.  The ultimate result of a prolonged stock market manipulation is the stock market crash.

Why Biggest Stock Market Manipulations Are Dangerous?

They are very dangerous because they always end with a steep sharp correction.

Feel free to quote me anywhere you like.

Am I saying that the stock markets will crash in 2020?  No.  I believe that a flat correction will be better.  A V shape recovery after the corona virus health disaster to bring most major stock indices to the 138.2% of the fifth wave will be welcomed to form a B minor of a flat correction on the monthly chart before an orderly C minor wave.

That would save the day and minimise the risk of a sharp correction.
 
Does it mean that this is exactly what is going to happen?  No; but it is just one of the possible scenarios.  It is in fact one of the best things that could happen.  If not then I would say may God save the financial markets.

Assets' price distortions and stock markets manipulations that go on for years (because they are hidden) often end with the sharpest corrections.

Why Central Banks Pomp Free Money Into Stock Markets?

They do it mainly because of political reasons.

To avoid large unemployment and save some businesses that should have been belly up.  Really, the central banks are trying to avoid a social unrest and control the sharp drop of the GDP and everything that comes with it.

That exercise is only a temporary measure and does not stop the pain.  It is just postponing it for later. 
It does not break it into pieces either; so it can be dealt with bit by bit.  On the contrary, it tries to suppress and avoid the corrections on multiple occasions.  That is really dangerous. 

In case one is wondering if I am now shorting the stock markets like there is no tomorrow; please note that that is not the case.  I am writing this article because it is almost naive to sail like an innocent child in the financial market's big waters without knowing about the biggest financial stock markets manipulation.  

Both medium and long term investors ought to understand how the stock markets are manipulated or distorted.

Is The Stock Market Always Manipulated?

No, they are not at a large scale.  

Though stock markets manipulations are ongoing regularly, most of them only affect few stocks.  Really, there is nothing to worry about.  If the stock markets are always manipulated then there are no efficient markets.  

It would be crazy to be a financial market player.  As I have stated earlier the biggest financial markets manipulation grows over time, and it is also hidden to many.  Those types of stock market manipulations often end with a steep sharp correction when no one is expecting it.  

The consequences are alarming and nobody should wish that for their enemy.  

Am I too pessimistic?  That may sound like it.  I prefer that tone because it will help traders and investors know what they are getting into.

What Is A Healthy Financial Market?

A healthy financial market is a market that is comparable to a source of living water.  A water flow that is not polluted, stagnant or contaminated. 

 A healthy financial market has both the trending and corrective phases.  It does not suppress one in favour of the other because they are both essential.  It is like breathing in and out. 

Indeed, both flows are needed to sustain healthy financial markets.  All financial markets cycles are essential.  Both bears and bulls must have their seasons fairly without anything blocking them.  A healthy financial market also exhibit the mini cycles that form the bigger cycles.   And in that process, most financial assets reflect their true current price without distortions.  

Businesses that are making more money from their core activities are rewarded; and those that fail have to reinvent themselves or go into administration.  Though it may sound evil that businesses go bust, in the long term, that helps the economic to get back on its feet in due course instead of being sucked in a muddy stagnant environment for years.

Should One Keep Blaming Central Banks Monetary Policy?

No.  It is always easy to blame others.  However, that does not make them also blameless either.  One thing is certain is that those who truly understand the stock markets manipulation will more likely control and manage risks without being trapped.  

They could also take calculated risks or decide to invest in other assets.  One will not be suing the Federal Reserve Bank or other central banks, but one can hedge positions or be more defensive than normal.  The central banks and other market manipulators will always be around as long as the financial markets are open.

Conclusion

There is nothing worse than a distorted asset price.  It derives from the biggest stock markets manipulation that is accrued over a long time in view to suppress bearish corrections that are overdue.  

A manipulated stock market does neither help the market participants nor the economy.  It is a dangerous economic bomb.  It often ends in a steep sharp correction.  

One should understand it and know how to play it without being on the wrong side of it.  Though, I sound really bearish today, I am not yet because we may end up having a soft landing in the shape of a flat corrective wave with a small sting in the tail in the form of a sharp C minor wave instead of full blown sharp correction.  


Well, we will see. Either way just remember to fasten your belt.

This is the end of this article.  If it is helpful then please share and bookmark it.  I will really appreciate it.  I will be writing more articles that will help traders and investors understand more what is going on in this messy financial markets.

Please stay tuned because it will not be too long before I post again.
Whatever, you do, enjoy yourself and be very happy.

I wish you the very best.
Happy Trading And Investing To All

This article is written by
George Beaulieu
founder of stochastic-macd.com