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Technical Analysis (More reliable than pols)

Are there any traders on this site? For anyone familiar with technical analysis of the stock market, it is a set of tools that can be used to predict price trends. For the most part it analizes the psychology of buyers and sellers in the market. This same approach can be applied to intrade (a gambling site based on the futures market) on a limited basis.

Thompson: Draw a trend line connecting all the bottom dips in his chart. His current numbers are close to this line. If he breaks it, then he is in trouble.
http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?c...

Romney: He had a huge uptick in early October, but quickly entered into a consolidation around $24. His consolidation pattern is reading negative, so it is unlikely that he will go up based on the information available in the market.
http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?c...

Giuliani: He is in an undecided holding pattern.
http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?c...

Huckabee: He's flattened out and might as well drop out.
http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?c...

McCain: He's dead in the water an not going anywhere.
http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?c...

And our boy Paul has been gaining steadily since May. It is interesting that his numbers started climbing heavily in late September (insider trading?) and then dipped in early October (probably on the false funding raising reports). In about two weeks, we will be able to identify if we are in a new trend. If we are in a new trend, then we could be at 12 by the end of October and near 20 by end-of-year.
http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?c...

All these numbers should add up to 100 (which they don't, so it's an inefficient market, but it's close). If Romney is showing signs of going negative and Ron is showing an increased positive trend, then Ron is pulling support from Romney. If Thompson breaks his current trendline, then that means Ron is pulling from him as well. It looks like Guiliani is going to stay where is at for now.

The next two weeks should be telling!

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Looks like RP has a new confirmed uptrend...

...but the indicators are looking a little skittish. I wouldn't be surprised to see some profit taking over the next few days and a return to something over 7.

Thompson is looking even more down. I don't think his campaign is going to last long. People haven't been that impressed since he got into the race.

Romney's numbers seem to be showing a reverse to the uptrend and Rudy is stagnant. I'm not big on Romney, but I can understand how a reasonable person could support him. I truly have no idea what anyone sees in Rudy. I've been waiting for his campaign to implode every day, but it just doesn't want to go away. I have to believe that people are looking for reasons not to vote for him.

Anyone else have thoughts?

Gaming these numbers is dangerous

NPR does an analysis of Intrade every year, so we need to keep an eye on these numbers. If you're going to try to have an impact on the numbers, you'll want to time it wiht NPR's analysis.

Two ways to affect it:
1. Tell people who believe he has a better than 6% chance of winning. The more Ron Paul supporters that use the site, the better.
2. We could coordinate a "buying binge" at when the technical indicators support one. You might be able to get other non-RP people buying on what looks like a breakout.

Much of the analysis below

Much of the analysis below is true. Anyhow, open up an account and trade play money. I have one, am long RP about 4000 and short Goober, Mcnuts , Grommet and Fred Flintstone... oh... Long Gold also

Tim
http://ronpaul.meetup.com/1040/

Push Paul to 10% on Intrade?

Volumes are very low for the Ron Paul contract. But if that means that it is easy to move these betting prices, then maybe it would be interesting to do so? What would it cost to push Paul up to 10% on Intrade? There are about 1000 existing ask-bids between 5.9 and 9.4. Does that mean that for $1000 they could all be bought at once, and the last price would be recorded as 9.4? Actually, about $500 would be enough to sweep all asks up to 8.7! Then one might put a fairly sized bid in the gap around 9.0 in order to stabilize the prices on that level.

Not all the investment would be a cost since it can be resold later, at least at a fraction of the initial value. And if Paul wins nominations it would give over 10 times the money in profit!

Any TA-alanyst should be exciting over the possibility to paint his own pattern on a chart...

Tricking Intrade?

Plop, that's an interesting idea... but it won't work. Here's why:

1) First, Paul's volume is not that low. 63,000 ten dollar contracts means 630,000 riding on the outcome of his nomination. It's small change in Wall Street terms but not insignificant in comparison to the trade volumes of other candidates.

2) More importantly, trying to "artificially inflate" or invest with the purpose of raising prices rather than reaping profits will backfire, as it should. In a free-market, prices are a reflection of consensus opinion (supply and demand). These are never fixed and each will continually respond to changes in the other. In the Intrade market, people are currently projecting a 6% chance of Paul's gaining the nomination. The market has settled there for now barring future developments, because it seems a realistic appraisal.

If one were to attempt to buy up all of the contracts from 6 to 10, as you are suggesting, he or she would no doubt find willing "sellers" (people willing to bet against Paul's chances); as the stock price continued to rise, more and more people would offer to sell shares at what they viewed as irrationally inflated prices. And as soon as 'the manipulator' stopped buying or ran out of money, a quick sell-off of profits would begin. Since the prices were higher merely because of an individual's "trick" rather than a broader consensus about Paul's campaign's viability, the price would not hold without constant infusions of funds. In the end, the price would return to "normal" as people cashed in on what is effectively the generosity of your proposal.

Markets don't like profit (prices greater than costs); rather, they try to quickly devour them until nothing is left but the 'right' number.

It's important to note that a donor who merely had more money would not be successful at keeping prices inflate either. Even with tens of thousands or millions of dollars, the results would be the same--you'd offer to give even more money and even more people would rush to take it. This would continue until the price returned to it's prior level. Don't forget that markets are never static, they continually react to price changes and one can never glimpse a full picture of what's going on, since whatever you do as a trader is already being factored into the NEXT change and the change after that...

"There can also be direct attempts to manipulate such markets. In the Tradesports 2004 presidential markets there was an apparent manipulation effort. An anonymous trader sold short so many Bush 2004 presidential futures contracts that the price was driven to zero, implying a zero percent chance that Bush would win. The only rational purpose of such a trade would be an attempt to manipulate the market in a strategy called a "bear raid". If this was a deliberate manipulation effort it failed, however, as the price of the contract rebounded rapidly to its previous level. As more press attention is paid to prediction markets, it is likely that more groups will be motivated to manipulate them. However, in practice, such attempts at manipulation have always proven to be very short lived. "
http://en.wikipedia.org/wiki/Prediction_market

Other Sources:
http://www.midasoracle.org/2007/07/09/is-manipulation-good-f...

You're right, in principle.

You're right, in principle. But when it is dificult to judge weather a fair probability would be 5% or 10%, then I think that it is possible to "trick the market" in that range.

To buy up the price to $9 would now cost $2,835 by ackumulating all asks now existing up to that level. Half of that is the 201 contracts asking for $7- It looks like there is one single person who asks for 200 contracts there. To cross the "resistance" at $9.3 and $9.4 would require another $5,000. I think this means that there isn't much money out there willing to bet on a probability significantly lower than 10%.

When short selling these contracts, I suppose that one must deposit security margin for the potential loss of up to $100 per contract. So one needs to show $100 for each contract short sold, regardless of its price (is this correxct?) And those who have short sold might want to cover their positions by buying them back if prices go up. Especially if they move up in force and based on good fundamentals as well. The buyer only risks the price of $7 or so, the short seller is risking $93.

While 64,000 contracts have been turned over in total since January, there must be some short sellers below todays price who might cover their positions by joining the buyers if pricves move away from them. And this market is illiquid. More than 10% of total volume occured during two days in August. And September has been the slowest month since April. Today the volume har been 5 contracts. With a price each of about $6 that means we've had a $30 day and the last couple of days volumes like that have pushed down the "prediction price" from 7.5 to 5.8, a price seen in mid-August.

The real "profit" from such a move would be the potential to increase the momentum of the campaign and maybe get a MSM-headline about Ron Paul and double digit probability...

normally that's how the market works but what about...

What about the Ronzilla factor? The Liberty Bug? The spirit of patriotic American can-do that we all started feeling when we first noticed the RPR starting to take flight? As the Intrade numbers surge, that might induce more people to look into Ron Paul, which could lead to the numbers being a self-fulfilling prophecy... loop.

Impossible?

I'm a market noob so be gentle. :-D

=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
Get active NOW to put Ron in the general election. ronpaul.meetup.com

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What is begun in anger, ends in shame.

Not impossible... just not easy

Ok, gently...

You raise a really good point about self-fulfilling prophecies. The (in)famous trader and progressive political entrepreneur, George Soros, promoted an idea he called "reflexivity". His big idea was that markets are not really accurate depictions of the future, since the future is constantly reacting to changes, even within the markets themselves. In other words, markets don't merely measure the world around them; they--at least in part--create it. This makes some sense theoretically, but many have alleged that for Soros this has been more than merely academic. With billions of trading dollars at his disposal, Soros was accused of nearly single-handedly bringing down the Bank of England... Many, economic pundist, Don Luskin in particular, suspected Soros may have also been behind sudden drops in Bush's Intrade numbers as the 2004 election neared.

Overall, however, the "market efficiency" hypothesis should hold. This is an theory which has been around for a long time now, and it says that markets reflect the best and most complete information available about the state of the world at any given time (the self-fulling prophecy idea recognizes that markets exist WITHIN that world). This idea of theoretical perfection discounts notions like irrationality, whims, mistaken beliefs, and overconfidence: in other words, people can't manipulate markets, because the markets simply "know better".

More recently, traders and economists have taken the more reasonable and practical approach that markets don't reflect information about the future so much as the public'sconsensus about the future (at least in the short term) . Particularly for prediction markets--forums for betting on future events and their outcomes--there is no underlying "commodity" or good being grown (as with corn) or developed (as with Apple's IPhone) or even physically tracked (as with the weather). Campaigns are more or less intangible, at least in terms of their success, and many RP supporters have commented that the MSM provides a mere echo chamber, a kind of self-fulfilling prophecy in itself, to promote candidates somehow deemed worthy as obvious front-runners until it is for better or worse reality.

This, to come back to your question, is why a market manipulation might be possible. Since no one really knows what's going to happen on elections until the voting booths open, perceptions about candidates can be self-reinforcing or self-fulfilling; if People see Paul's numbers going up they might start to believe that there is more the the campaign than they had previously thought. So no, it's not a crazy or unrealistic idea at all.

BUT...

1) Irrational exuberance ends in burst bubbles. When people buy stocks for no good reason, it creates a speculative cycle which, much like a pyramid scheme, leave the last round of "investors" with a lot of hot air. A speculative bubble occurs when people stop responding to any kind of underlying reality about a stock, or in this case a candidate and his campaign, and start merely hoping that they can ride the roller coaster up and sell before it hits its peak. Speculative bubbles can and do lead to production and enthusiasm; indeed, they often lead to massive overproduction which then helps fuel a recession as warehouses loaded with inventory suddenly face drastically lower demand.

But back to Paul's campaign... such a manipulation would likely appear as a large peak on the Intrade graph, precipitously risen and suddenly fallen.... if you look at his Stock Chart, you may see just such a phenomenon already occurring on a small scale. They haven't lasted very long, although, they have often been followed by continuing gains in the smoother moving average of his stock price (moving averages are simply some number of past days' prices averaged together; they show longer term trends without the chaotic ups and downs which volatility produces in the short-term).

2) Market dynamics still hold. Even when markets are being manipulated or people are acting with "excessive" optimism, there has to be a buyer and a seller for every trade. On Intrade, as prices rise, sellers will rush to fill the sudden gap between what prices are being offered and where their personal expectations lie. As long as prices are "inflated", sellers will competitively lower their asking costs so that each one can get a piece of this irrational action until the prices return to a more stable equilibrium.

In order for market manipulation to "work", it would have to be subtle enough and realistic enough that people were left to wonder... "hmm, could there be something to this?" Both parts are critical. For one, a brazen attempt to manipulate a market is likely to be dismissed by traders (and pundits) as an anomaly. Secondly, no sudden rise in prices will be convincing unless there are underlying circumstances which suggest that they're plausible. For Paul, this is that fine balance between his encouraging fundraising numbers, straw poll results, and internet 'stats'...but they have a limit that most people intuitively sense. (If you want to know where the limit is, walk around your town and think about how many people you pass have even heard of Ron Paul).

Last thought, just to tie things together. The implication of Soros' idea was that people take markets seriously enough that markets can themselves influence the future. With enough money, one can create panic, and panic creates adverse reactions--likewise in a positive direction. For Paul's stock prices, panic might be the concern amongst sellers of his stock that the price will actually STAY too high. This seems unlikey for two reasons. The first is what I already mentioned--outside of places where he is popular, Ron Paul is simply not that popular (or even well known) yet.

Second, prediction markets offer prices which can be seen as probabilities of a given event happening. Since among the many different contracts on Intrade for the Republican nomination, one of them will be "right", it holds that their sum must be 100%. The implication of this is that for any candidate's stock to go UP another candidate's must be going DOWN. It might be easy to convince people that Paul is doing well, but it's harder to do that in a significant way until it starts creeping into his competitors poll numbers, fundraising, and media coverage. This is starting to happen, but it won't show in his stock prices for a few more months (I project he'll be trading solidly at 8-9% come January 1st).

That's a lot of information, but maybe it will help explain why market manipulation is not as easy as it seems (or as easy as some would like it to be).

Price bubbles are rational

I don't believe for a moment in "irrational excuberance" or any kind of collective psychology on free markets. Asset prices sometimes rise far above their fundamental market prices because people buy them and use them as collateral for loans. Loaning is attractive in order to go short the money being inflated by the FED. Those price bubbles have nothing to do with the assets, but everything to do with the money. It is most rational and most profitable. There is of course a tremendous risk with timing when to leave the sinking ship, but that's a price worth paying for profiting from the inflation.

Ok...

I agree with your point that no trading can ever be "irrational". For one, no one knows why another person makes a trade (that person themselves might not really know his or her motivations). Further, any trade is "rational" so long as it attempts to reap a profit. Therefore, the distinction might be necessary that while there are no irrational trades, there are trades made based on irrational beliefs (unsupportable or unsupported claims). For example, if I am a trader who had previously relied on published poll numbers for my stock insights combined with a reviews of mainstream press and internet articles, it would be irrational (or at least a-rational) to suddenly start buying up more stock merely because "the price was rising". Indeed, it would be more rational to wait until the stock settled back down to its prior level, or to short the stock through it's period of unexplained advance. Thus, trades can be made based on empty or non-existent evidence. This is not to say one could not profit merely from following a trend and hoping to get out before it reverses.

But what would RP's campaign gain from a run on his stock? As the price increased dramatically, say from 6-10, breaking through prior resistance levels, that might indeed suggest that Paul has joined the front-runners. Especially if this was coordinated with phenomenal and unexpected fundraising numbers, a burst of MSM TV interviews, and a stellar debate performance on a topic about which Paul has great expertise...hmmm...

Wait, but those numbers have to HOLD. They have to be supported continually by more press, more growth, more tv, more ads, more blog posts, more road-signs, etc. Otherwise, it will just be seen as a fluke (like Huckabee's jump and subsequent slide since the RP-Huckabee exchange).

So, could it work? Would it help? Would it not be better just to do the nuts and bolts things and let the stock price take care of itself? I think the answers are: not really, maybe slightly in the short-term, probably, and most likely. But maybe there's more to understand about these markets...

Unreliable

It looks like the volume is low enough that the charts could be unreliable.

Also, TA is only useful in the absence of news. There is going to be a lot of news in the coming weeks and months.

I am about as far from an expert as it's possible to get on this, but here's what I see:

Giuliani looks like he's encountered some serious resistence. Very unlikely to ever go higher if he doesn't break it this time, which is unlikely.

Agree on Thompson. He's not in danger yet, but he's getting close.

Huckabee is going no where.

I would avoid Romney, but can't count him out yet.

If I was trading, I would have tried to buy McCain at 5 and waited for a quick jump to 6 or even 8, if the news was big enough. Not a long term buy, just a quick trade.

Paul's obviously is the best chart. The spike at the end of Sept. is more likely speculation on a good fundraising quarter than insider trading. Buy the rumor, sell the news, right?

But, I'm just a rank amateur so I won't be placing any bets.