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Aug 25, 2008 - Issue #125



Unshackled! NYSE Specialists Let Loosed



Unshackled! NYSE specialists to lose constraints on trading.

In an effort to recapture order flow lost to other markets, the NYSE, in the second major change of its rules in the last four years intends to remove some of the restrictions on the trading activities of its specialists. (See tradersmagazine.com for full story).

Among other things, specialists will be recast as 'designated market makers', allowed to trade 'aggressively' and 'opportunisticly', rather than 'passively' as now. They will be allowed and encouraged to hedge via derivatives (options and single stock futures), thereby, enabling more depth (size) in quotes.

However, they will no longer get "first look" at the incoming order flow. Does this mean that public 'stop' orders will be in more danger of being run over or 'gunned'? If so, all the more reason to use Calls to protect short positions and Puts to protect long positions.

CNBC should be able get immediate clarification.

Heads Up:

During the next two weeks, the following Dow components will report earnings. Keep a sharp eye for 'surprises'. You might be able to catch a nice swing in the week or two leading up to 'Earnings Day':

None.

Dow score card for the week ending 8/22/08.

DJ-30: 11628.06 -31.84 -0.27%. The Real World (arithmetical) DJ-30: 47.61 -0.13 -0.27%.

UP: 10, Down: 20.

Trends (weekly charts): This is the subjective part.

Rising (Generally Higher Highs/Higher Lows) 3 (-5) 10%:

+*CVX, +*HPQ, PG.

Consolidating (Generally Lower Highs/Higher Lows) 22 (+4) 73%:

AA, AXP, BA, C, CAT, -*DD, -*DIS, -*GE, -*HD, -*INTC, JNJ, KO, MCD, -*MMM, MRK, MSFT, -*PFE, T, UTX, VZ, WMT, +*XOM.

Declining (Generally Lower Highs/Lower Lows) 5 (+1) 17%:

AIG, -*BAC, -*GM, IBM, JPM.

+/- denotes change of direction.

* denotes change of category.





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