Market Manipulation Still Ignored by Mainstream Media

by the Curmudgeon and Victor Sperandeo


Reaction to Fed's Tapering Announcement:

Victor was watching the (stock market) tape at 2pm EST last Wednesday, December 18th--both before and after the Fed's announcement following their two-day meeting.  Sperandeo noticed a very strange market reaction right after the Fed's unexpected tapering notice:  the market immediately dropped sharply in the next two minutes, but then turned around on a dime and started a straight up move.  In over 45 years of trading, Victor had not quite seen anything like it.  He said that the aforementioned rally started long BEFORE the Fed provided its dovish guidance that short term interest rates would stay at zero even if the unemployment rate dipped below 6.5%.  Hence, there could be no justification for a bullish market response after the initial decline.


By 2:03 p.m., the Dow Jones Industrial Average was up 51 points; by 2:05 p.m., it was up 125 points; by 2:10pm, up 158 points; and closed out the trading day on a new high -up 292.71 points.  The S&P and Russell 2000 followed a similar trajectory.  Please refer to the S&P e-mini futures chart below:

Victor's analysis: "This is the best chart of reality.  There is no doubt that the sharp turnaround after the Fed's announcement was a (institutional) buy program TO OVERCOME ANY selling after the Fed's announcement.  THE EVIDENCE SHOWS it was all orchestrated by the Fed."


None of the newspapers or on-line financial news media reported anything odd or peculiar about this sharp intra-day reversal.  In fact, it wasn't even mentioned in their daily or weekly stock market columns.  Yet Victor and a few others noticed definite signs of stock market manipulation....


Opinions Hint at Stock Market Manipulation:

Dennis Slothower of Alpine Capital wrote to his Dec 17th On the Money subscribers: "The Fed dealer banks pushed prices to counter this announcement and in the process were assisted by huge short-covering buys throughout the day. We could see more short-covering the next day or so. Believe me – traders are not pleased that the punch bowl is finally being taken away – even if they now have a schedule for going on a diet."


"The Fed has plenty of firepower. And with today’s spike blast, like a mother lion protecting its offspring, the Fed was determined to keep all predators away. It unleashed its buying power exactly at the 50-day moving averages for the S&P 500 in another clear display of Fed intervention. This isn’t the first time we’ve seen the Fed intervene after a key Fed announcement – and this one is big."

This implies to us that before the market opened, the Fed told its Dealer Banks (many of whom are owner/shareholders of the Fed) to buy stocks/stock index futures at a pre-determined level, e.g. at the 50 day moving average of the S&P 500.

In a Dec 19th blog post, Pam Martens wrote:  

"The idea that the stock market took a Xanax after lunch and was in a confident, gleeful mood by midafternoon is the stuff of tooth fairy yarns. Don’t think for one second that this was a genuine rally, that Wall Street is cheering its punch bowl being taken away, that removing $10 billion a month from speculators is chicken feed, that the onset of Fed tapering isn’t perceived on Wall Street as the horrific beginning of tightening of monetary policy.  This was no rally. This was panic short-covering."

"The obvious, and most important question, is who pushed the market up in the first place to panic the shorts? Who got the party started? That would have taken some serious money moving into Standard and Poor’s futures contracts or key component stocks in the Dow.  Because of off-shore trading and dark pools, we’ll never know who turned the onset of Fed tightening into a rally and a cheery “vote of confidence in the economy.” But, it’s rather interesting to consider that outgoing Fed Chairman Ben Bernanke would not like his legacy to be memorialized as the guy who created a stock bubble, bloated the Fed’s balance sheet to $4 trillion, and then crashed the market on his way out the door."

Paul Craig Roberts wrote on Dec 20th: 

"The question is: who provided the upward push that panicked the shorts and sent the market up 292 points? Was it the plunge protection team and the NY Fed's trading floor? Was it the large banks acting in concert with the Fed? It is hard to avoid the conclusion that this was an orchestrated event that forestalled a market decline."

After a phone interview, Mr. Slothower wrote in an email to the CURMUDGEON:

"We believe there is a coordinated effort by the Fed and its dealer banks whenever the Fed wants intervention support. They merely tell the dealer banks what to do. The dealer banks collateralize some of their reserves and use the newly collateralized deposit to buy securities (stocks or treasuries or commodities or even positions in the futures markets), effectively supporting whatever the Fed wants supported."

"This mechanism is used to burn shorts into buying at strategic times, it is used to offset potential stock sell-offs during uncertain geopolitical times and it is used to send a “market message” to the public. For many months now, it was clear that bad economic news was good for equities because it meant the Fed would defer or minimize tapering. But when the actual feared “taper” takes place, the market supposedly changes its mind in a matter of seconds and treats the taper as the best thing since sliced bread – no way! The Fed required intervention to send a message to the public and put a floor under prices. We have often seen this happen in early January's as well, on the strategy that as January goes so goes the year. Simply put – it is not a free market!"

Victor agrees with Slothower that it's not a free market, but he goes much further.  Here are his thoughts:

"In the Communist Manifesto, Karl Marx states principle #5 in overturning capitalism is "Centralization of credit in the hands of State, by means of a national bank with State Capital and an exclusive Monopoly."  This is the real EVENTUAL outcome of THIS Fed policy- it has extended its monopoly to manipulation of the stock market."

"As to why billionaires George Soros and Warren Buffet have philosophies THAT ARE THE OPPOSITE OF FREE MARKET CAPITALISM, I quote from Gary Allen's excellent book, None Dare Call it Conspiracy:   "If one understands that socialism is not a share the wealth program, but in reality a scheme to CONSOLADATE AND CONTROL THE WEALTH, then the seeming paradox of super-rich men promoting Socialism becomes no paradox at all."   This is what the Fed and its owners -the bankers - and some very select billionaires are promoting, aiding and abetting."


Was the Gold Market Manipulated Down this Week?

Some believe that the Fed may have also manipulated the gold market down to protect the value of the U.S. dollar.  Spot gold dropped almost $48 on Thursday, December 19th to close below $1200 per ounce for the first time in many years.

William Kaye had predicted gold's takedown two days prior. He noticed that the ETF gold trust GLD experienced a sudden loss in gold holdings as shares were redeemed for gold. Only the large Fed-dependent bullion banks can redeem shares for gold.  Possession of physical gold allows the short-selling that drives down the gold price to be covered.

In the days prior to the Fed’s tapering announcement,  GLD was drained of 25 tonnes of gold by primary bullion banks, JP MorganChase, HSBC, Deutsche Bank, Goldman Sachs, and Citicorp.  Those banks happen to be the biggest players in the derivatives market for precious metals. HSBC is the custodian of the GLD gold and JPM is the custodian of SLV silver. HSBC and JPM are two of the three primary custodial and market-making banks for Comex gold and silver.  Note also that GLD has been trading at a 3.7% to 4% DISCOUNT to spot gold for most of this year.

Victor writes: "The Fed understands that it must protect the dollar from being driven down by decreasing its QE money creation {AS THAT MIGHT CAUSE WEAKNESS IN THE US ECONOMY}.  Therefore, the orchestrated selling of gold -either by the Fed itself or its investment bank owners - is executed to protect the dollar’s value."

Closing Comment:

This perceived market manipulation is far more than a conspiracy theory and should be diligently investigated by all the financial authorities and serious financial journalists.

We challenge the press, the SEC, CFTC, and the U.S. Congress to investigate both the December 18th sharp run-up in the stock market indices as well as the December 19th plunge in the gold price.  The Fed should be asked what role, if any, it played and specifically what financial instruments (stocks, ETFs, futures, options, etc.) were used.  The Fed's Primary Dealers should also be asked the same questions. 


Till next time........................


The Curmudgeon

Curmudgeon is a retired investment professional.  He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996.  He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1979) to profit in the ever changing and arcane world of markets, economies and government policies.  As President and CEO of Alpha Financial Technologies LLC, Sperandeo overseas the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.