aussiebull says 'sell' - fair or unfair?, page-22

Hi MrMcGee,

I am trying to reduce my time on Hotcopper as the LNC thread has become painfully nauseous to read over the last couple of months. Many 1 or 2 liners with zero substance.

There has been nonsense about the crossing of 200 day moving averages crossing with 50 day moving averages. This was supposed to be when the institutions would bail. Nothing about them buying back in when they cross going north. These are the very same institutions which spend a fortune on "Cuckoos" which are placed metres from the ASX mainframe so that they can get a micro second advantage. They employ mathematicians and statisticians to come up with the algorithms which so annoyingly keep price from representing any type of fundamental value.

So lets talk about some of the myths and facts known to us.

The institutions selling at a designated crossing over of moving averages. The only institution I have data on and unless we can get Downside with his Iress figures is Credit Suisse. On the 30 May they supplied a substantial change in holdings notice where they owned 9.83% of the company. They had actually been buying and not selling after their previous notice. Since then they have have not supplied any more notices. Thus we can assume that they haven't changed their holdings by more than one percent. I think the share price was roughly around $1.50 at this point.

That when the share price went to 50c we would be in a long accumulation phase.

Well because of the above facts there was unlikely to be an accumulation phase because Credit Suisse already held all the shares they wanted thus we ended up with a V bottom. They are making their money day trading the crap out of the stock. Since they are the main marketmaker they can pretty well do what they want.

Shorts

LNC is not particularly hit hard by shorters with the average number of shorts being pretty constantly around 15% of all day trades. Most of these are bought back on the day and thus have no real influence on price. What is interesting in that most of the accumulated shorts come from off market transactions.

Daytrading

Most of LNC's action is just tied up with daytrading. We know how many short transactions are happening on the ASX and Chi-X. Thus if we double these transactions as they need to cover then the shorts are responsible for about 30% of the daily action. I have no way to check this but lets assume that there are equivalent amount of those going long and then selling. Thus 60% of daily action is day trading but that probably doesn't take into account transactions from Credit Suisse which has had no disclosure of shorting.
Thus there is really not much genuine buying and selling on fundamentals.

Sector Influence

You cannot forget the influence of sector on price. Before I have shown the influence of the sector on price with incredibly high correlations of r2> 0.90 being common.

Yesterdays price fall was not based on oil volumes but simply on CNX having a capital raising. Its share price fell by 26% so of course it made an effect on the sector sending the sector into a spin as a rolling stone gathers moss and the all round sector price falls. I imagine that sector analysis is certainly one of the factors that institutions have plugged into their algorithms. It really makes no sense that LNC's net worth plummets because another company has a capital raising but that's your markets for you.