Gold Market Summary - The Morning After

July 8, 2003

You would think the Fed-ESF-Investment Banker punters responsible for yesterday's transparent, synthetic equity index rally would at least give us another thrill this morning by constructing a look alike follow through from yesterday's wonderful excitement.

Ask yourself: With nothing different from yesterday, why are the plastic punters absent this morning?" The answer is simple. They fooled no one but the professional fools (money managers) who have failed to learn anything from the past.

No follow through this morning is proof that yesterday was an embarrassing sham. Who in the world will believe your market shenanigans if you fail to show up the next day in force.

Remember the dollar trading and ESF footprints as furious and short-lived action. The reason for that is simple. They run the market via spreads, lifting and dropping legs selectively. After running a market up, they must catch the immediate follow through to reset their spreads as in yesterday's example.

Yesterday in the early morning the short leg was lifted violently on the government-sponsored spread position for the equity indexes starting before the USA opening. The government sponsored punters cover their shorts or longs furiously to pump or dump a market, but then (here is the catch and the footprint of their action) must put the spread on again.

I could manipulate any market on earth any way I wanted short term if you provided me the funding for the largest spread trade on the plant today. By constantly doing this and resetting the spread, any professional trader with years of experience could blow the ESF into outer space. I have always wondered why Hung Fat and Dr. No did not simply take the other side of the ESF - Investment bank spread and play with them. There could be billions in that contra operation.

What occurred yesterday was an exercise in manipulation 101. That is the short side of a huge equity index spread that was intentionally covered in a violent manner. Then at mid day the government punters started to put the spread back on.

That was why the price action decelerated in the afternoon. It is so obvious that I want to heave when I hear and read the totally wrong reasons given for yesterday action. I listened to a talking head declaring yesterday's action to be the public discounting an economically strong second half. God help us all!

Now for a few definitions:

Spread = Opposing transaction short and long different forms of the same item

Leg = One side of a spread, either the long or the short.

Cover = Sell the long or buy back the short side of the spread.

Lift a leg = the act of closing the short side or the long side of a spread.

Drop a leg = put the short or the long back on to lock the spread again.

Lock a spread = Reduce the risk as close to zero as possible. It never is absolutely zero risk unless you deal in fraudulent over the counter derivatives.

Jim Sinclair

http://www.lemetropolecafe.com/