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9/16/2005
The Cruelty of the Market Mistress, by Victor  Niederhoffer

There is something very cruel about the Mistress of Markets. Some corpora delicti: After crude oil closed at a 40 day low at 63.11 on Tuesday, thereby playing havoc and footsie with the fixed system boys who love to sell the short term minimums, it promptly went up 4% in the next two days, a nice loss on the 5x leverage that the pros like to use. But the pros who work on a 200-day basis and those who envision $1000 gold could smugly note that they were still up big, big, and the trend once again gave them the sweet spot in time. Yes, the pros' fixed-rules following index, the S&P Managed Futures Index, closed down 2% on Monday at 1041, down 4% from the high September 1 of 1092. But then today, crude oil closed again at 63.00 taking back all the hope and hype for a week, the way it did so often to the bulls in stocks during the 2000-2002 period, a period that is still in the hearts and hopes of the chronic bears.

As an aside, I could not refrain from placing an order to sell some crude at 65.45 on Thursday at 10:38 A.M. Ten minutes after my order was entered it traded 65.50 three separate times, and 65.45 twice. Needless to say, I wasnít filled. "We'll make sure they take those prints down". The 65.50 prints were indeed excised, as so often happens in the S&P pit in Chicago. I have given up trading in that pit, as I will in the comparable pit in New York for energy. Volume in Chicago has been reduced by 80%, taken over by millions of mini contracts a day that trade electronically in their stead. I predict a similar revulsion in New York unless some people of vision undermine and reduce the public's tendency to grind and bid-ask itself to death.

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