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Media: 'Sell, It's A Market-Top'; MMs: 'Look Again, At What We See'

Mar. 08, 2021 10:35 AM ETMSFT, WMT14 Comments
Peter F. Way, CFA profile picture
Peter F. Way, CFA


  • The Market-Makers [MMs] fill huge-volume block trade orders placed by big-$ "institutional" funds that are adjusting their multi-billion-dollar stock portfolios.
  • Guess which trade orders are likely to move market prices in the next 2-3 months, our odd-lots or their orders?
  • Our daily Market Profile reveals the MMs' price-range forecasts embedded in the hedging deals they make to protect the required shorts taken to fill client orders.
  • Take your pick: Emotions or intelligence? Combat Generals usually have well-developed intelligence and use them.

Investment Thesis

The tide of institutional caution or enthusiasm "floats all equity boats." Is your present stock swim activity adequately cash-clothed or have you been skinny-dipping?

Only you can determine whether the question is more a matter of current tactics or of ongoing strategy, and what to do about your decision.

So have a look now at what the MMs' self-protective actions are saying about market-leading stocks like MSFT, WMT, BA, KO, NKE and MCD. Often the MMs are far less emotion-driven, working from planned active-investment strategies. Learn what those plans entail and what they could mean for your portfolio.

Today's Market Profile

Figure 1

(Used with permission)

This is a frequency distribution from the hedging actions of 3,496 stocks and ETFs, all stacked up appropriately at the individual size seen at the bottom horizontal scale just above the numbers 100 and 110. Their stack counts are indicated on the right-side scale.

The numbers of the bottom horizontal scale are measurements of a proportion of the whole range of price uncertainty seen for each equity in the next few months, the part which lies between the current market quote and the likely low price extreme.

Examples: A 50 Range Index [RI] stock has as much upside as downside. A 20 RI offers 4 times as much upside as down. RIs over 100 or negative maintain the same relative proportion scale as those between zero and 100, but clearly indicate extremes.

How many RIs are there above 50? Would you ever buy one at 50 or more? How about stocks now selling at prices below where experienced market pros think are reasonable (negative RIs)? Yes, there currently are more than 25 extremely-low priced equities.

The overall average Range Index for the 3500 issues is about 29. The multi-year range of that average

This article was written by

Peter F. Way, CFA profile picture
Peter Way Associates provides daily updated, near-term (3-month) price range forecasts for over 2,500 widely-held and actively-traded stocks, ETFs and market Indexes. Comprehensive results are available on the SA blog of my name.__These forecasts are derived from the way market professionals protect their own capital placed at risk while helping big-money portfolio managers adjust their holdings in multi-million-dollar "block" transactions.__ They cannot be found elsewhere.__Having these price-change prospects available on a continuous basis encourages individual investors to actively and economically build up the values of their own smaller portfolios. PWA only provides information for individual investors; it no longer manages investments for others.__Rates of portfolio capital growth being achieved by subscribers are at MULTIPLES of the growth in market averages, due to the efficient use of holding period time and the compounding of gains a number of times each year.__Risks of capital loss are protected against by insightful selection guidance and holding-period-limit disciplines. The advantages of good selection and careful timing amply cover a much smaller portion of unavoidable losses.__These Market-maker forecasts have several decades of demonstrated productivity. Earlier in the 20th century they were used by large institutional portfolios, and now in the 21st century they are available only to individual investor wealth-building portfolios. Thousands of day-by-day identifications of specific securities having consistent, odds-on profitable results rule out any likelihood of their exceptional outcomes being due to chance. Peter F. Way is a veteran Chartered Financial Analyst, having taken and passed the CFA Institute’s required 3 examinations in the first years they were given, 50+ years ago. Armed with BS in Economics from the Wharton School and an MBA degree from Harvard Business School, he has managed staffs of dozens of Investment Researchers and Quantitative Analysts for the nation’s largest bank, arbitraged index options for NYSE Specialists, and managed portfolios of hundred-million-dollar equity investments for Fortune 100 corporate pension funds and non-profit endowments. He has been elected President of professional Investment Analyst Societies in San Diego and New York City and has served on the editorial boards of the Financial Analysts Journal and the CFA Digest.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in WMT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Peter Way and generations of the Way Family are long-term providers of perspective information, earlier helping professional investors and now individual investors, discriminate between wealth-building opportunities in individual stocks and ETFs. We do not manage money for others outside of the family but do provide pro bono consulting for a limited number of not-for-profit organizations. We firmly believe investors need to maintain skin in their game by actively initiating commitment choices of capital and time investments in their personal portfolios. So our information presents for D-I-Y investor guidance what the arguably best-informed professional investors are thinking. Their insights, revealed through their own self-protective hedging actions, tell what they believe is most likely to happen to the prices of specific issues in coming weeks and months. Evidences of how such prior forecasts have worked out are routinely provided. Our website, blockdesk.com has further information.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

JustALittleGuy123 profile picture
Since 2015 to present, Peter's Top 20 MM Intelligence Lists have averaged about 28-30 Bps. 65% winners, with disproportionately bigger and MUCH faster gains than the few inevitable losers. Best of all, when a position is closed out, there is a fresh List available every Market Day to find new places for new positions.

The tools at the website offer unique perspectives on the population which are unavailable anywhere else. They have the unique ability to compare across issues in a more "apples to apples" fashion, as you can see in the example Reward:Risk map above.

If you need nitty-gritty statistical details, BTFs show in-the-now characteristics, and actuarial outcomes of how it is now did when it was like this before on previous occasions. It involves over 3.5 million data-points each day to generate these outcomes. There's a lot of power in those numbers...

That Market Profile tool was instrumental in Peter's recognizing and correctly predicting the October 1987 crash BEFORE it happened. I know because I was there when it (his prediction) happened.
Diesel profile picture
We've seen this movie before. Every time markets have a correction, some people run out in panic, saying this is the top, we are done with bull market and how we are all going to die. Then market recovers and makes new highs within weeks.
@Diesel the market does not recover.
They make it recover.
These are two different things.

Right now, the market is kept up by the rates. QE and money printing are both keeping it up.
At some point very soon, printing more $ will have no impact. That’s when 1929 happen.
Captain Value profile picture
@Diesel yeah just like in 2000, oh wait.
Michael Dolen profile picture
Not surprising. Downward moves in large and mega cap, whether tech (MSFT) or otherwise (WMT) are rather benign. They may be expensive, but at least they have real earnings and cash flow. What's selling off is everything that doesn't and deservedly so.

One exception which is selling off is AAPL, however that has been almost all multiple expansion since 2017 or so. It needs to come down.

Outside the Dow, I do feel AMZN should hold up okay. I would be surprised if it goes below $2,700. Their p/s is more or less in-line with the past 4 years. Any overshoot on the downside to $2,500 or lower is a great buy.
Crayfishkaliari profile picture
@Michael Dolen its not just apple
Michael Dolen profile picture
@Crayfishkaliari Among FAAMNG, it pretty much is just APPL who is almost entirely multiple expansion since 2017. Yes, MSFT too, but to no degree like AAPL.

NFLX I'm not even going to get into, bec I'm talking about those with FCF (120x FCF doesn't count in my book).
interesting not sure I buy it.
Alohatoyou profile picture
Love your articles and the MM future perspective your data/analysis provides.
A good read - thank you.
Thank you VERY much! Got in both.
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