The Serendipitous Put: A Rational Case Study of Market Manipulation

By Joshua Enomoto, Founder of and contributor


Peruse the internet for gold and silver manipulation and you are bound to run across a limitless supply of conspiracy theories more vast than the cotton-based concoctions of the Federal Reserve’s printing press. Often times, these theories are dismissed on hand, either due to their outlandishness or to their lack of quantifiable verification. However, the events surrounding the week of Nov 26th, 2012 are so compelling and fresh in the memory that they deserve a closer look: what occurred during that week, and in particular, Wednesday the 28th, was labeled by the mainstream financial media as well as alternative news sources as manipulation without actually calling it such. The names of the participants of said manipulation have been removed since they were actually never provided in the first place. Nevertheless, their paper trail has been permanently imprinted on the technical charts, and this is where our journey begins:


5:15PM EST, Monday Nov 26

Gold (11302012) A


After a significant move up to the $1,750 level during Friday’s session, today was destined to be a slow day at the COMEX. The gold bulls weren’t willing to keep on stackin’ at these levels, yet the move that led to the current technical picture was legitimate, one that was supported by strong volume and stronger fundamentals. That prevented the weak-hands from getting too shaky. But the equities sector was getting slammed, and people just didn’t know which way to go. The fear limited enthusiasm and ultimately the bulls sat this one out.


11:20AM EST, Tuesday Nov 27


Gold (11302012) B

Markets were still getting slammed. Jittery investors cast nervous glances on the panoramic jigsaw puzzle of flat-screen television sets scattered throughout the exchange floor as fiscal cliff concerns dominated the headlines. Back in the commodities pit, buy and sell orders filled the air with an arid cacophony. Someone’s got to move this friggin’ thing along…


3:16PM EST

Gold (11302012) C

The screen flickered for a few seconds, but it was largely ignored. The Dow was taking a real beating. This fiscal cliff stuff was no joke: we could really be in for a nasty one! Sell orders could still be heard throughout the exchange, but the worst of it had died down by now. The situation didn’t look good, but most people, God bless them, still had some optimism left and were waiting for Congress to give them a lifeline…anything really! But then again, what choice did they have? Most of their assets were tied up in the markets, and if that went down…well, they might as well just sink with the ship. The sell orders were now only a whisper, mere background noise to the deafening body language: Slumped shoulders, weary hearts, downcast eyes.


Tough way to end the last week of November, thought one trader as he slowly began to unwind for the day. When he went to reach for his ledger, a flicker on the nearby monitor caught his attention.


That’s strange…someone just initiated a massive put on gold futures…


9:32AM EST, Wednesday Nov 28


Gold (11302012) D


7,500 contracts!? What the hell do you mean!?


The resonance from the opening bell had yet to cease, but that obviously did not deter one mystery seller from inexplicably exiting himself of millions of dollars worth of gold contracts. In one fell swoop, spot gold dropped more than a percent before many folks had the time to brush their teeth.


I’ve heard of a New York minute, but damn…!


The pit was going crazy. Orders were being shoved around and changed before the original requests were even entered. Who is this guy? Shouting…lots of it. It got so bad they sent Jackie DeAngelis from CNBC to find out just what the hell indeed was going on.


Is the technical picture still intact for gold? Would you be buying today?




And then the line cuts off.



2:32PM EST Thursday, Nov 29

Gold (11302012) E

Maybe it wasn’t that bad after all! While it wasn’t a full retracement of yesterday’s precipitous decline, gold bugs had reason to celebrate. The fundamentals held up and why shouldn’t they? Just where do these jackasses in the White House think they’re gonna get the money to do all the things they want to do? Never mind the bullocks! The important point was that the mystery manipulator obviously tried to trigger the short-side algorithms but failed miserably. The bastard also placed a friggin’ put on gold, right before he sold his contracts. That would have been worth untold millions had he successfully driven the price down to the 1680’s. But the fundamentals held! Anyone can manipulate the markets in the short-term with a large enough leverage, but the long-term will always abide by the fundamentals…


11:45AM EST, Friday Nov 30

Gold (11302012) F

Not again!


No, this time is a little different. The weak-hands from Monday finally had had enough. They wanted out and they wanted out now! Most of them were concentrated on the near-term technicals: gold had failed to hold the 50 day moving average following Wednesday’s selloff, and now, it appeared it was barely treading water above the 20 DMA. Volume for the second-half of the month was decidedly bearish and lo and behold! The equities are lit up in neon green font! In the immortal words of Vanilla Ice, it was time to drop the zero and get with the hero!


Except that there may not be that many heroes left in this storyline…


While the above case study involved certain creative licenses, the main assertions and the technical price actions are all accurate and can be confirmed through mainstream or alternative media sources. The main point here is that while no one may be able to pinpoint who is behind market manipulation, the fact is, such manipulation does exist. So long as greed is considered an unfortunate part of the human lexicon, there will always be a strong incentive to rig the financial casino to one’s favor.