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Summary

  • "Manipulation" Theorists Are Focused On The Wrong Issues.
  • Discussion Of Market Sentiment.
  • Upcoming Week's Expectation About Price.

Abraham Lincoln once said:

You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.

What honest Abe was trying to say was that one can hide the truth from the public for only so long. Ultimately, the truth will come out. Until now, I have had to keep a very tight lid on this information. But, I always knew that it was only a matter of time before it finally became public. And, it seems that time is now.

Yes, I am going to have to finally come clean with the truth. It seems as though someone on KITCO has dug deep enough, and has discovered my deep dark secret:

It appears that AVI GILBURT receives insider information that accurately predicts metals prices. It also appears that he then uses this knowledge to fabricate an aura of "Truth" around his fundamental analysis, as to why metals are trending the way they are.

His analysis always arrives at the conclusion that central banker coordinated price manipulation is impossible, despite that the central banks are the world's largest holders of metals and that they coordinate their activities via the BIS.

It appears that GILBURT is a paid-for change agent. Use him to predict metals prices, but ignore his analysis, which exists to brainwash you.

Yes, folks, it is true. I have been on Seeking Alpha for 3 years now to "brainwash" you.

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I can no longer keep a straight face when I see things like this. But, the problem is that there are a significant number of investors who believe this type of stuff. Why is it if you are relatively accurate in the metals world do people assume you are part of the "cartel," or potentially even control the market? Is it so hard to accept that someone can predict a market without having "inside information?"

The biggest problem that people like this commenter have is that they militantly believe that the metals are so manipulated that it is impossible for the "average investor" to make money. They believe that bankers are sitting in their lofty towers trying to figure out how to steal their last penny in their metals investments.

But, the core issue is that they so firmly believe in their heart of hears that the metals should be much higher right now, and the only way possible for this not to be the case is that they must be manipulated. I mean, have you ever seen any other industry that has been so unwilling to accept they were wrong?

While the metals were soaring to their heights in 2011, they were all toasting each other and counting their "profits." They were patting themselves on the back in all the articles they wrote at the time, claiming how smart they were, and that the world was so foolish to not believe them. But, for some reason, these people do not believe in the old adage "what goes up, must come down." To these metals bulls, the metals are only supposed to go in one direction, and if it does not, then it must be because they are manipulated. Imagine if Newtown had taken the same perspective?

It also leaves me wondering one thing: If these people believe that there are people sitting out there who are trying to manipulate them out of their money, why do they bother engaging in this market? If you knew a store was cheating or overcharging people, would you ever go back to that store?

So, my suggestion to all metals investors is to please take responsibility for your investments. Stewing in your chair at your desk about some "bankster" manipulating you out of your money will never help you make money. Try to understand that markets naturally enter phases of progression and regression, and that is just the way all markets work.

This mass form of progression and regression seems to be hard wired deep within the psyche all living creatures. This is what we have come to know today as the "herding principle," and the herd seems to turn at Fibonacci ratios, as supported by the studies I have cited in many articles before.

Humans are hard wired for herding within their basal ganglia and limbic system within their brain, which is a biological response they share with all animals. In fact, in a study performed by Dr. Joseph Ledoux, a psychologist at the Center for Neural Science at NYU, he noted that emotion and the reaction caused by such emotion occur independent and prior to, the ability of the brain to reason.

In a paper entitled "Large Financial Crashes," published in 1997 in Physica A., a publication of the European Physical Society, the authors, within their conclusions, present a nice summation for the overall herding phenomena within financial markets:

Stock markets are fascinating structures with analogies to what is arguably the most complex dynamical system found in natural sciences, i.e., the human mind. Instead of the usual interpretation of the Efficient Market Hypothesis in which traders extract and incorporate consciously (by their action) all information contained in market prices, we propose that the market as a whole can exhibit an "emergent" behavior not shared by any of its constituents. In other words, we have in mind the process of the emergence of intelligent behavior at a macroscopic scale that individuals at the microscopic scales have no idea of. This process has been discussed in biology for instance in the animal populations such as ant colonies or in connection with the emergence of consciousness.

In fact, one commenter to one of my articles on Seeking Alpha made the following astute point regarding how news affects these subconscious herding trends:

Compare the market to a stream of ants marching by in, generally, a single direction. Run a stick across their path and there will be some momentary confusion and reaction to the direct stimuli but very soon afterwards the original parade of ants continues and the stimulus is forgotten.

So, based upon much research, it does seem that the market may be considered to be on a path that is determined by a mass form of herding that is given direction by social mood. It sure does explain the oft asked question of why markets go up when bad news is announced or vice versa. It also takes out all the guess work in attempting to determine the next "news event" that may move markets. And it also means that any attempted "manipulation" in the metals market does not really have the affect so many believe it does.

When I conducted my weekly perusal of metals analysts in the media, it seems that bullishness was still abound. On Friday alone, the morning headline on MarketWatch was about how strong gold has been in 2014.

Last week, I noted what I viewed as an unreasonable expectation for a 20% increase in gold over the past week, and that author has since backed away from this market call once gold began to decline. But, isn't this typical of most market participants? When the metals are going up, they expect it to continue to go higher. When it stops going up, well, they don't always expect it to continue, but sometimes they simply get a little less bullish. Yet, how many truly bearish calls have you seen relative to the great majority of bullish calls being made over the last two weeks?

What is more noteworthy, and should be looked upon as a learning moment, is that this analyst who made the call for a 20% increase did so based upon world events he felt would affect the market. Well, have we not been through this exercise with QE, and many other "catalysts" which most expected to cause the metals to rally?

Was not everyone so certain that QE would cause the metals to skyrocket? Yet, even despite the QE announcements, and as crazy as it sounded to many of you at the time, I stuck to my guns and noted that the set up in the market sentiment was pointing down, with or without QE. And, until sentiment is set up to allow an external market catalyst to have a seeming affect upon the market, the market will not react in the manner in which almost everyone expects. As we all now know, QE did not exactly have the affect almost everyone expected that it would. In fact, the market reacted in the exact opposite manner, which had almost everyone shaking their heads in disbelief. And, yes, we have seen this again with the Crimea scenario. We hit our target of 133.50 in the GLD, and the market backed off exactly as expected. So, again, I urge everyone to ignore external events when the sentiment is not yet ready for a rally to take place.

Now, I know that many of you have pointed towards the short period of time in 2012 where I was watching a potentially bullish set up to take us to new market highs. In each of my articles at the time, I noted a specific level through which the metals had to move in order to trigger that bullish set up to react to the upside in a big way. However, not once did the market move through the levels cited in those articles, and that bullish set up was eventually invalidated, which then caused me to look to much lower levels into 2013. So, remember, no methodology is infallible. It is simply not humanly possible to be on the correct side of the market 100% of the time. Yet, the methodology you chose must provide you with parameters to know when you are right or wrong early enough to be able to change directions to the correct side of the market, and not continue to "hope" for new highs in the metals, as they continually head lower and lower.

As for the actual action in the metals, it seems that the 133.50 target level did stop us dead in our tracks, with the market slightly exceeding it with a high last week of 133.76. We saw the GLD also drop this past week to just under our lower support region of 128, with a bottom on Thursday of 127.26.

So, do we have a confirmed top? It is not yet confirmed, as there still exists the outside possibility that the market may yet attempt to reach the long time target we have had in the 136-140 region, for which we have still come up short to date. However, it is not something I am willing to trade to the upside at this time, even for a short term trade, unless I see more market action early next week.

As an Elliottician, I usually look for a 5 wave move in the opposite direction to signal a trend change. As of the close on Friday, we do not have 5 waves down under our standard patterns to consider a trend change has occurred with high confidence, even though we did marginally break ideal support. Yet, until the market is able to get back over the 129.50 level, with follow through over 131.50, it runs a great risk of seeing the bottom drop out in a big way.

As far as the recent COT report on gold, it supports the bearish set up we see in the GLD, as the commercial traders added a significant amount to their short side earlier in the week. Now, when you consider that this information, when published, is already old, and the market declined through the week, we currently have no clue as to whether they covered those shorts. But, that is why we look towards our Elliott Wave analysis to discern where we are and what to expect.

For now, due to the market not providing the strong signal I was expecting on a drop below 128GLD, I am going to use the 126 and 131.50 levels as my guideposts. If we see the market move strongly under 126, then I believe we are on our way to new lows in GLD. If we see the market strongly move over 131.50 before it drops to 126, then my minimum target for a final move higher will be 134.75, with an ideal target of 136.75. But, I do want to note that since we had an "underthrow" of the uptrend channel in this move up in 2014. So, if the market does attempt to make a new high, there is a strong likelihood it will "overthrow" the top of the uptrend channel, which means we could see a spike over the 136.75 level, which will be summarily reversed in a strong manner. Such action will signal the start of the next decline phase.

As for silver, it is in a much more precarious position, and actually makes me concerned that GLD may be further along in its decline phase than I have outlined above. (But, that is why I have warned that a strong break down below 126 will likely set off the bigger decline I am expecting). If silver maintains this current very bearish pattern, it makes it much more likely that it can break down below the 16/17 region target that I have had for quite some time.

The main support for silver remains the 19.90 level. A strong break down below the 19.90 level can begin a waterfall event for silver which can take it down several dollars quite quickly. But, I am not expecting an immediate break down just yet. Ideally, I think the 19.90 level will hold for now, and we will see at least a corrective bounce from that support region. And, if silver were able to exceed the prior peak at 21.82, then silver should be able to target the 23-24 region before we begin the larger degree decline I am expecting.

In summary, both metals have not completely invalidated the potential for another high just yet. While it is not a high probability just yet that new highs will be seen, I remain open to the possibility if the metals can exceed the levels cited above. But, make no mistake about it, I am still expecting each metal to make a lower low. And, based upon the patterns I am seeing in the dollar and the metals, it is quite possible the dollar can see a strong rally into the May/June time frame, whereas the metals may see their final lows in that same time frame.

Disclosure: I am long SLV. 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.

Additional disclosure: While I own a core LEAP position around which I trade, I have also layered into an intermediate term put position in GLD and SLV.

Source: Breaking News: Who Really Controls Silver And Gold?