I have seen much analysis about how incredibly bullish the recent COT report seems to be. The recent figures provide that the commercial traders went net long by almost 9000 contracts, which many people view as a very bullish factor. But, at the same time, the large speculators - which have been the more correct side of this trade of late - went net short by 7000 contracts.
Although the common belief is that this is a bullish factor, since only the commercials are positioned correctly, I think the common perception truly has to be questioned of late, as they got fleeced in the last drop, since they were not positioned correctly.
And, along with questioning the common belief of how to read this report, I think another common belief has to be put to rest, and that is the "manipulation" of this market by those same commercial traders. In fact, they were not positioned correctly for this past dramatic drop. Yet, for some reason, this has not prevented those that argue "manipulation" to even question this perspective. Rather, they have only been shouting louder.
So, let me see if I understand the "manipulation" perspective in light of the recent action. The theory postulates that the commercial traders position themselves opposite the rest of the market (i.e. they short the market) so that they can take the market down and take advantage of lower prices, thereby fleecing the "regular" investors in the market.
But, in the last dramatic decline in gold, the commercial traders were not positioned properly and they were the ones that were fleeced. But, the "manipulator" theorists have screamed even louder!? Sorry to sound a bit perplexed, but does this not make you scratch your head? It makes me think that those "theorists" are yelling so loudly that they are cutting off the blood flow to the frontal lobe of their cerebral cortex.
So, again, I am going to suggest to all reading this article, please get real! The true reasoning behind the "manipulation theorists" is that they feel they are simply too smart for the market to move against them. It simply cannot be that their fundamental analysis is wrong. So, the only logical explanation is that it must be that someone is manipulating the market. And, their complete disregard of the improper positioning of the commercial traders that they feel are manipulating the market is nothing less than pure intellectual dishonesty, if not simply laughable.
I mean, are they really arguing that the same people that manipulate the market are manipulating the market to the manipulators determinant? Wait . . . maybe they actually did cause this massive decline to their major detriment because they knew the "theorist" bloodhounds were on to them, and they were trying to throw them off the scent. P-U-H-L-E-A-S-E!
So, now, for the rest of us that like to live in the real world, let's take a look at what the market is telling us. While this rally in GLD may yet not be complete, and we may even see another push higher to 146, I am still not convinced that we are in a larger degree bullish phase yet. Rather, I still think we are simply setting up the next decline in GLD back to the 127 region, with the potential to drop to the 124 region. In other words, nothing has changed my perspective from last week:
For now, I will not even begin to assume we have a new larger bull run in gold until we break through the 149GLD level on much larger buying volume. Remember, pattern supported by buying volume evidences true commitment and sentiment, and we are not seeing that right now. Even though there is still a possibility that one more spike high can be seen early next week, once the 138 level is taken out to the downside, I think we run the risk of another drop towards the 127 region, with 123.75 as the next larger floor below that.
Disclosure: I am short GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.