Specialist Control Over Market Openings And Closings
Controlled Openings And Closings:
According to the Securities And Exchange
Commission Report Of 1963 and I quote,
"The Control specialists have on prices is no
better illustrated than at the opening. Although it
is impossible to isolate one aspect of the
specialists activities as the most important, any
ranking would have to place the arranged
opening high on the list".
They go on to say and I quote "The heart of
the problem with the Stock Exchange is the
specialist. If there was to be any reform of the
market it should be with the specialist".
It’s sad to say but none of the findings or
resolutions, which addressed specialist
short selling, has ever been implemented.
What the Commission stated was that with
their controlled opens and closings
specialists were "rigging prices". The
Securities and Exchange Commission has
been a captive of the Stock Exchange and
its insiders since its inception in 1934.
Arranged Openings:
There are five important ways that
specialists handle prices at openings.
1) When you have a dramatic advance at
the opening while in the midst of a generally
declining market. The function of this
advance is quite simple. The specialist has
accumulated an enormous amount of
inventory during the decline, and what this
rally does is two fold.
A) It keeps the public from continuing
selling at what are still retail price levels.
B) It forces the public to rush in and buy
stock. This is what enables the specialist to
unload his inventory and sell short.
It is still the basic scenario of wholesale and
retail merchandising. When they drop prices
they are looking for the ultimate wholesale
bottom, possibly conducting several short
advances along the way to unload inventory
and sell short. Once they have achieved
their low wholesale prices and are flushed
with inventory budging from there shelves,
there next function is to rally to retail to
unload the stock at its highs with several
short declines along the way to re-stock
inventory, before reaching the ultimate
highs.
2) The next opening is a dramatic decline
as specialists approach to within 50 to 75
points of a rally high. The function of this is
again two fold.
A) One reason you have a sharp decline
like this before you go to a high is because
the specialist never allows the public, which
has been buying at current prices to sell at
the highs. Before going to the final highs the
specialist will conduct not one period of
decline but a number of declines, because
he doesn’t want the public selling stock to
him at the highs where he wants to do the
selling. The function here is to shake out
investors before continuing the advance to
new highs.
B) The other function of a decline at the
opening in the course of rising prices is that
it allows the specialist to clean out the lower
price territory of stock. In other words the
specialist sees orders to sell on his book,
which tell him if he drops the price of the
stock he is going to be able to get that
stock. This accomplishes two things, not
only can he sell this stock when he rallies to
the high, but when he moves down again
after reaching the high there will be less
stock to absorb as he moves lower.
The Securities And Exchange Report
pointed out that if the customers knew the
orders they entered on the specialist book
were actually responsible for the decline he
conducted to get that stock they would
never have entered their orders on the
specialists book.
3) The next opening you see is really the
sum and substance of how specialists
achieve there most important objective, the
accumulation of stock at wholesale price
levels. When they start the decline investors
are praying prices will reverse and go back
up. Specialists know this and play them
along. Each time they drop prices they then
rally back a bit, may be for a day or two,
and then go down again. Investors hold on
to their stock. They know they should sell
but they are hoping for a miracle.
Then, when specialists are near the bottom,
they drop prices sharply, which is what they
were planning to do all along. The first
decline sets the stage as the investor says
I’m going to get out. Sure enough the next
day the price is dropped again and
investors begin selling. This can signal the
beginning of a major rally, especially if
during the day you see major big block
accumulations. It could also indicate a
short-term rally to distribute stock before
moving still lower.
The extent of the big block activity or the
lack of big block activity provides you with
your clue as to whether specialists have
launched a sustained rally, or a short-term
rally to unload inventory before moving
lower. When they do this they hit you with a
major decline one day, they rally a little for a
couple of days before hitting you again with
another barrage of major declines. This
causes investors to hold on to their stock
with the slim hope that things will turn
around, but they don’t.
4) The next important opening that
specialists employ is something you always
see in the beginning and middle phases of
a bull market. Invariably in a bull market in a
bull trend you will see stock prices opening
down. Prices will be up at the close and
then down 10, 20, or 30 points at the open,
then up again at the close, and again down
at the following mornings open. Then
maybe the market will do nothing for two
days or so, then a little advance, and then
sharply higher. This is called “the sneaking
up process”. The declines at the open
keep the public from buying, and they also
trigger public selling which allows the
specialist to accumulate stock and then
unload it back to the general public on the
way up.
Each time he drops the issue he picks up
more stock because he wants to keep his
investment accounts that he filled at the
stocks lows in-tack. He doesn’t want to sell
any of his stock anywhere except at the
highs. So in the course of the bull phase he
needs to accumulate stock to sell to the
public when he rallies. The other reason he
drops prices at the open is to cover the
short sales he established at the previous
days close. Once he covers those short
sales he is up and on his way again.
5. The next opening is “the sneaking down
process”, which is basically just the
opposite of the proceeding process. This is
called the opening advance after several
declines in a declining market. In a
declining market what they generally try to
do is advance at the opening and then drop
prices at the close. This keeps public hope
alive, there by preventing selling, and
encouraging buying at higher prices. It also
allows the unloading of inventory before the
Specialist moves to lower price levels.
Arranged Closings:
Now we move on to the two most important
closings in the specialist system. These two
systems will show you how the money
stolen from the many is distributed to the
very few.
1. The first closing is in an up trending
market. The market or stock will be up all
day, and then suddenly at the close is
advanced dramatically. This is part of the
sneaking up process discussed earlier. The
small advance during the day doesn’t
encourage public buying. The sharp rally at
the close enables specialists to advance
prices with a minimum of public
participation. That sharp advance generally
used to come in the last hour of trading.
buying and encourages them to sell at what
are wholesale or near wholesale prices.
They are further discouraged when they
see prices dropping at the opening the next
morning. The rally is then resumed later in
the day or the next day.
If however, there has been significant big
block activity at the high, it could indicate
the terminal phase of the rally. Whenever
you examine how specialists handle
openings and closings, the question you
should always ask is, what are specialists
trying to get investors to do. That will tell
you whether specialists want to buy or sell
for their own accounts, and therefore
subsequently rally or drop prices.

Now its getting to be the last half hour and In the presence of big blocks this type of
often times in the last 10 to 15 minutes of closing decline could indicate the beginning
the trading day. The reason it is done at the of the sneaking down process. It allows the
latest possible time of the day is because it specialist the move to lower prices, without
gives investors a minimum amount of time stimulating public selling until prices are
to make up their minds and then get into the much lower.
markets to buy. If specialists had conducted
a sharp advance earlier in the day, say
three hours before the close, they would
have allowed investors to buy all during that
time. But by rallying at the close they
prevent a great deal of public buying. Then
investors think about it all night and decide
to watch the following mornings open.
When specialists open the market lower,
the public becomes discouraged, and again
holds off making any purchases. Its all part
of sneaking prices higher.

2. The last important close that can tell you

a great deal about specialists’ plans for the
future is the decline at the close in the
course of sharply rising prices. If the market
is in an up trend and the Dow is up say 150
points or more, and is dropped 25 points or
more during the last hour, there are two
possible functions with this type of close. In
absence of big block activity at the high, the
probability is this is a sneaking up
operation. This discourages investors from