Is The Market .... RIGGED? (No Paywall)

Is The Market .... RIGGED? (No Paywall)
Image Source -

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.


Welcome folks to the first of this new Market Insight series of notes. They will focus primarily on investing and trading methods and for the most part will be published on a no-paywall basis.

A word to those of you that have been receiving our work on the Substack platform. We've now added all of our 'free' members from one of our Substacks, the Cestrian Market Insight newsletter, to our own site right here. We'll bring paying members over here to our own Ghost-based website in due course. We hope you find the content here more frequent, more in depth and more easily consumable than was previously the case. Thanks for reading our work - we hope you'll do so for a long time to come!

Now - onto today's Market Insight note, the aforementioned, "Is The Market Rigged?".

Who Stands A Chance, Really?

by Alex King, CEO, Cestrian Capital Research, Inc

If you ask most anyone normal in the street, "are financial markets rigged", their answer will be, heck yeah. Unless they are under twelve years old, or purposefully deluding themselves in order to maintain their inner calm. (In which case, who can blame them? Life's tough. You gotta do what you gotta do to get through the day.)

If you ask anyone at the SEC, "are financial markets rigged", their answer will be, American securities markets are the finest in the world. And you know what? They would be right.

If you ask anyone at a Big Money desk, "are financial markets rigged", they will become suddenly called away by a superior for an emergency client matter.

So, are markets rigged? Can anyone not called Larry and Fink or Ray and Dalio really make an honest buck?

Learn To Speak Market

Want my view? There are some micro-caps and not-so-micro caps that, yep, are rigged. Genuine, straight-up securities frauds. But those are the exception.

But when you see half of FinTwit screaming, MANIPULATION, and they're talking about the S&P500, or the Nasdaq, or Apple, or Nvidia, or some other major liquid name doing something or other at that time, what they mean is, I DON'T UNDERSTAND WHAT IS GOING ON. And yet these same geniuses put their capital in harm's way all the while not understanding what is going on.

What is going on is, securities markets are a game.

And there are rules to the game.

The written rules can be found at the SEC's website. There for everyone to read and understand. If you break the written rules then you run the risk of being fined a small or large amount and/or being shut out of the game temporarily, permanently, and/or in jail. Simple.

The unwritten rules, though, you won't find them laid out anywhere. For the unwritten rules operate in the domain of signs, symbols, semiotics in short. No, better - a language. Not yet available on DuoLingo, though it would make a pretty great course now I come to think about it. "Duo, do owls only trade overnight?".

Anyone who wants to be consistently successful in securities markets has to either (1) learn how to break the rules and get away with it forever - probably some people have done this but I don't think it's a repeatable, learnable strategy, or (2) Learn To Speak The Language Of The Market.

The language of the market isn't earnings per share, revenue growth, balance sheet analysis, market share, competitive moat, or any of that stuff. These are all interesting topics and certainly help you understand the underlying companies, the issuers of the securities you may own or seek to own. But the companies are just that, issuers - the companies are not the securities. The securities - stocks, bonds, ETFs, options, futures, and all manner of increasingly bizzaroworld derivatives which can be found deep in Big Money catacombs - are things in and of themselves. The language of the market pertains solely to securities, as distinct from the underlying issuers. And the language textbook, the learnable repeatable method, can be found in stock charts.

OH NO, say fundamentalists. TECHNICAL ANALYSIS. That's just drawing any old lines. GARBAGE!

OK, sure. Have at it. Delude yourself a little longer. Like any opiate, religious fundamentalism of the financial kind is a lot easier than dealing with reality. But reality? Reality is that securities pricing is determined not by EPS but by demand for and supply of the securities themselves. That demand and supply ebbs and flows according to mainly endogenous factors ie. is the stock in an institutional buy zone, hold zone, or sell zone. Exogenous catalysts - earnings, the Fed, inflation etc - these are mythemes around which narratives are built - man I wish I was trading already when someone tried to teach me structuralism, it would have made way more sense - they have an impact here or there but mainly they are signs, published to attract market participants to come buy or sell only after Big Money already made its move.

Like DuoLingo, But Weekly, And Less Annoying

Every week here in this Market Insight series, we'll publish a note covering how we analyze securities. We'll talk method, and we'll give you some worked examples. We'll cover both fundamentals and technicals. Our goal is to help you Learn To Speak Market a little better than you do. And I'll tell you something for nothing. The more learning I do personally, the more learning I find I have to do. Because like all languages, the market evolves constantly, and just when you think you have the rules nailed, BAM along comes some new set of idioms that everyone seems to be using except you, and here you go again, back to the drawing board. But a little smarter on each go-around.

Low Intensity Study Materials

If you have a moment, this video of ours is worth watching I think. The topic is, in essence, How Big Money Creates Gains Out Of Nowhere. It is core to learning to speak market. If you learn how to spot what Big Money is doing, you can follow just a little bit behind - never in front, unless you want to risk being crushed by its wheels - and do very well without ever getting particularly stressed. If you can follow Big Money successfully, repeatably, then it means that, self-evidently, you have Learned To Speak Market.

So, start here!

Cestrian Capital Research, Inc - 5 March 2024.

Analyst's Disclosure: I/we have a beneficial long position in the shares of UPRO, TQQQ, NVDA, SPXU either through stock ownership, options, or other derivatives.