Folly Of Fundamentals Has Developed Religious Zealotry In Manipulation And The PPT

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
June 23, 2016

Franklin once said: “So convenient a thing is it is to be a reasonable creature, since it enables one to find or to make a reason for everything one has a mind to do.”

Are Fundamentals The “Reason” To Invest?

As a society, we seem to need “reasons” as to why a market acts the way it does.  In so doing, it provides us with some sense of control.  But, those that understand markets – or even life in general - really understand that control is an illusion. 

For anyone that got caught looking up at the market highs in metals in 2011 due to the all the “reasons” it must go higher, but then seeing your accounts destroyed over the last 5 years, your mantra has been “the fundamentals will matter one day.”  In fact, recently, I even read an article entitled as such.

You see, fundamentals are the “reasons” through which we believe we have a modicum amount of control over markets.  We believe if we can identify the reasonable causation behind a market move, we will be better equipped to divine the next move in the market.  And, again, an honest investor in the metals market has finally come to grips with this being a fallacy, as markets do not move linearly or based upon “reasons.”  In fact, we have seen markets often move opposite to the reasonable perspective, such as in the case of QE.

But, as human beings who believe we can control that which is around us, many are unable to recognize the fallacy underlying those assumptions.  It would shake us to the core of our being to accept we are not in control.  It would shake us to the core of our being to accept that we are unable to reason our way to profits.  But, alas, such misguided thinking has led all too many to huge losses over the last number of years in the metals market.

So, what have many done?  Have they done the appropriate soul searching with regard to their underlying assumptions that have led to their losses?  Have they questioned their thesis of what moves markets?  Or, as Andrew Lang put it, do they “use statistics as a drunken man uses lamp-posts... for support rather than illumination."

Manipulation Begins Where Fundamentals End

Rather than begin to accept that fundamentals have not mattered or will ever matter in assisting you to identify market turns in the metals, too many have begun to lie to themselves.  You see, another human frailty is being unable to accept when one is wrong, but, rather, to find blame.  So, rather than abandon “fundamentals,” many have said that they will “eventually matter,” but only when the “manipulation” ends. 

The fundamentalists have gone from believing that fundamentals are the driver of the market all the time to believing that there is an entity, or entities, that were able to drive the price of silver down by almost 75% from its high in 2011.  Yes, belief in fundamentals have morphed into belief in manipulation, despite neither being able to discern price direction. 

The extents to which we, as “reasonable creatures,” are able to fool ourselves is unlimited, especially when we are not willing to accept the truth. As Dr. Franklin also noted, “Geese are but Geese tho’ we may think ‘em Swans; and Truth will be Truth tho’ it sometimes prove mortifying and distasteful.”

And, the truth is that there is no entity that is able to “control” society or markets to that degree.  As I have stated for years, while there may be entities that are attempting to move a markets by a very small degree to “game” the market, silver did not drop by almost 75% from its highs due to an invisible hand. https://www.gold-eagle.com/article/market-manipulation-and-dark-secret-f...

In fact, if central banks or governments did maintain such control, why have so many of their actions not had any affect in many countries worldwide?   Why have so many of their attempts at financial engineering failed? Has anyone ever followed Japan, as just one example?  Anyone remember that after the passage of TARP the market only then began to “crash,” and went on to lose yet another 40% of its value?   I am sure it is nice to have a belief system, but when the factual support for that belief system is proven false time and again, only the foolhardy hold steadfast to the erroneous belief system, and quite possibly because they do not understand that there is a more accurate and reliable way to track the market.

Side Note About Foolish Belief In The PPT

Moreover, those who remain steadfast in their manipulation theories also believe in the PPT (the Plunge Protection Team).   In fact, I have even read an “analyst” (and I use the term quite loosely in his case) who believes that the PPT is present at every market low that does not act as he thinks it should. In fact, this same analyst is the one who claims that when he began to “guess” when the manipulation may occur, he started trading a bit better.  But, isn’t the premise behind manipulation theories and the PPT that the market is being moved in a way that one cannot expect?  So, here we have an analyst who not only admits his methodology does not work, but that he is dishonest to boot.    Isn’t it nice to never be wrong and just be able to blame the boogie man?

But, the PPT is no different than Santa Claus or the Tooth Fairy.  You see, the only hoax on financial markets has been the government’s attempt in making people believe that the PPT steps in to save the markets.  But, if there was a real, active PPT, then we would not have market crashes ever. Do you really think the market would have crashed if the government could control the markets through the use of the PPT, in addition to TARP?  In fact, why would they even need TARP if the PPT was hard at work?  Ever ponder that question? For those who do not want to wear blinders in the market, you may be interested to know that it is a fact that we have seen more market “crashes” since the advent of the PPT than at any other time over the last 100 years. 

http://seekingalpha.com/article/287343-plunge-protection-team-no-different-than-santa-and-the-tooth-fairy

In conclusion, it has been quite clear that the fundamentals in the metals market has led people astray, and most of them have found a home in the “manipulation” theorists camp.  Rather than question the underlying basis which has been in error for years, they have chosen a perspective which does not help them grow their account, but does seem to make them feel better or provides an excuse for being wrong.  But, unless you equip yourself with an honest methodology for divining the direction for the price of the metals market, you are simply setting yourself up for another fall in the coming years.  You have to be honest with yourself in order to make money in this market, and fundamentals and manipulation have not been able to help you grow your account, nor will they be able to do so in the future.  And, isn’t growing your account why you read articles like this.  Isn’t growing your account the reason you invest?

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: [email protected].


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