[nostrademons]

I wonder if some of this is because of the "prices are set on the margins" effect of markets. The price of anything is set by the folks who are actively transacting at any given time; if you're not buying and selling, your opinion doesn't matter.

Oftentimes, near a market top, the people who are value investors and actually care about price end up selling off all their holdings. But because they have already sold, and are not buying, they drop out of the market entirely. Prices get set by the people who are price insensitive, because they're the only ones willing to participate. As a result, you often get the "blow off top" right before a market crash, where the stock market moves sharply upwards even though fundamentals say it should crash. All the folks who believe it will crash have already left and no longer participate in price-setting.

[jjav]

> But because they have already sold, and are not buying, they drop out of the market entirely. Prices get set by the people who are price insensitive, because they're the only ones willing to participate.

The buy & hold value investor is also not participating in price discovery since they are just passively holding.

[Rury]

That makes sense, but something I've been wondering as of late... what if markets are just being... cornered? Surely, it can difficult to assess genuine market activity from not, no?

I mean I know it sounds absurd for something like the size of the stock market, but all you really need to do is have enough capital to consume floating demand, and you can control prices. Even easier with options, as they give leverage to do this. And arguably this essentially explains the behavior behind stocks like GME, AMC, AVIS, BIRD... heck even Tesla. If you look at Tesla, most of its stock price appreciation happened in 2020-2021, when SoftBank was allegedly controlling their options chain. And since its peak in 2021, when SoftBank stopped, Tesla has underperformed the S&P 500, and would probably would have fallen by now if it wasn't for all the passive inflows from being in the Mag 7. I mean, it could just be coincidence or genuine market activity, but how can we be certain that markets aren't just being cornered by coordinated groups?

Also, the oil market right now doesn't make a whole lot of sense if you compare futures and spot and what analyst estimates are giving even in the best case scenario. But Japan mentioned considering shorting over $1.4 trillion in oil futures, and if they actually are, then suddenly things make a bit more sense...