Sentiment Speaks: How The Deutsche Bank 'Manipulation' Case Affects You

| About: VanEck Vectors (GDX)


Price Action Over Prior Week.

Anecdotal and Other Sentiment Indications.

Price Pattern Sentiment Indications and Upcoming Expectations.

Price Action Over Prior Week

Last week, I noted that we had to remain over the 29.20 level in the GDX to continue to complete the next phase of the bullish price pattern. Immediately after I posted that article, the market pulled back to the 29.24 level, and continued higher to complete its next bullish structure off the recent lows.

Anecdotal and Other Sentiment Indications

When we look back at 2011, and we read the articles being published back then, it stands out quite clearly how bullish 99% of the market was at the time. One would have to search long and hard to find an analyst who did not believe that it was a certainty that gold would eclipse the $2,000 mark. Yes, the analyst community got this one really wrong.

However, rather than adjust their expectations, they continued to call false bottom after bottom for years to come. Moreover, rather than admitting they were wrong or did not really understand what drove the metals market, it was much easier to blame some unknown, universally disliked "banksters," who supposedly bilked everyone out of their money by manipulating gold down by 40%, and silver down by over 70%. And, in my humble opinion, this created a snowball effect for the common "manipulation" theories we all read about.

The latest supporting "evidence" to which the manipulation theorists proudly hang their hat is the recent news about Deutsche Bank's admission of "manipulation." Everyone now assumes they have found the smoking gun which "caused" silver to drop by 70%, which proves they were not wrong to be bullish all the way down. Of course, they can now "prove" that everyone was cheated out of their money due to this "manipulated" decline of 70%. Right?

Wrong. This was not the first case regarding market manipulation, nor will it likely be the last. But, what many do not point out is that the manipulation dealt with in these cases is not the "manipulation" to which all the analysts have been pointing to explain why silver lost 70% of its value when they did not see it coming.

You see, the manipulation dealt with in these cases were attempts by these banks to move the market by a very small percentage in order to make a quick buck off a very small move which they attempted to control, often during low volume periods of market action. This is what is claimed within the actual legal complaints filed against these banks, which generally provide that the banks "manipulated the bid-ask spreads of silver market instruments throughout the trading day in order to enhance their profits at the expense of the class."

Moreover, and quite importantly, this type of small degree "manipulation" occurred whether the market was going up or going down, and such manipulation was not geared towards only dropping the market lower, as the manipulation theorists want you to believe. Please read that again. It was not claimed in these lawsuits that the manipulation had the purpose of taking the market down as you have been led to believe.

These lawsuits do not support the commonly held proposition that the market was "manipulated" to drop 70%, as in the case of silver. To claim that these small degree "manipulations" caused the market to drop 70% is complete unsupportable nonsense, and is only used as a scapegoat by those who have been very wrong about the market, but refuse to take responsibility for their decisions.

Yet, this is the predominant perspective taken in our financial markets because people do not like to take responsibility for their reckless actions. Just because there is evidence of paper cuts in the market does not mean that it was the cause of the market (or your account) bleeding to death.

If your purpose for being in the metals market is to make money and increase your net worth, then let's begin to be honest with ourselves rather than continue to wear blinders. Let's begin to be honest with ourselves rather than try to convince ourselves that, as Jackie Mason says, "it's because of those sons of b****es" that we lost money. A paper cut did not cause your account to bleed to death. Greed and reckless actions did.

Trying to claim that a standard market correction was caused by these paper cuts is simply ignoring the way markets react in ordinary due course. I mean, we saw the correction coming, and even called the top within $6 of the high struck in 2011. We also suggested all our subscribers begin moving back into the long side of the market at the end of 2015 and into January 2016. And, we care not about any of the manipulation theories.

It's about time people begin to take responsibility for not recognizing an ordinary market correction, rather than trying to shift the blame to an invisible hand. When you are finally at the point that you can take responsibility for your decisions within the market, maybe you will be able to develop the understanding of how one maintains on the correct side of the market the great majority of the time. And, for those that think I am lecturing them in a condescending manner, my answer to you is I really do not care. Sometimes the truth needs to be stated in a bold manner in order to shake people to their core. While it often hurts, in the end, it can be of great benefit.

As Ben Franklin said:

Geese are but Geese tho' we may think 'em Swans; and Truth will be Truth tho' it sometimes prove mortifying and distasteful.

Price Pattern Sentiment Indications and Upcoming Expectations

The market continues to set up quite bullishly. In fact, as noted last week, as long as the GDX remained over 29.20, the pattern will continue to remain bullish. And, right after my article was posted, the market pulled back to the 29.24 level, and continued higher to complete its bullish set up.

As it stands now, as long as we now remain over the July 27th low, I will continue to look higher in the metals complex. Specifically, I am looking for GDX to rally to 39-41, silver to rally to at least 22.15 (but, more preferably up to the 23.30 region), and GLD up to the 142-145 region.


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: I may be buying some GDX calls in the next day or two.