Tuesday, March 06, 2012

The Manipulation Of Home Depot's Stock

Home Depot is one of the most interesting large cap stocks over the last six months or so. This tight regression band of price is clearly a sign of quantitative finance or algorithmic trading. Because there is no single point of information, we really don't know exactly what is going on with the stock. Have a handful of hedge funds teamed up to manipulate the stock as stock pools did going into 1929? Is it some other dynamic? Who knows. But, it's similar to the manipulation of Apple and countless other stocks. This type of very tight linear regression channel is purely manipulation. And, someone is making a lot of money doing it. So, in the wild west of unregulated capitalism, why not?

The stock market has no reflection of value or the economy or any sustainable truism. It is instead a market through which participants seek to take money from others. Gambling. It's no different than stepping up to the roulette table at The Sands and putting all of your money on number 19. It's a little more sophisticated than that for many given there are methods available to rig the bet's odds in favor of the house or the participant but that's pretty much it. Home Depot was half the price it is today just a handful of months ago. What changed fundamentally to demand a doubling in price? More houses are in foreclosure, home prices have dropped further and the economy is weaker. Home Depot now has a higher market value than it did at the peak of the largest housing bubble the world has ever seen.

Click on graphic for a larger view

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posted by TimingLogic at 10:46 AM

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