Nice little short covering rally underway for the juniors right now. It must be nice to just pound away for a day and a half, cover for a fat profit after you have gang raped the entire sector, and not have to worry about facing any regulatory pressure at all. The only thing more pathetic than the people who are doing this crap is the people that make excuses for it or pretend that no manipulation is a factor in all of this.

Why bother having any securities regulation at all? If you are going to just stand on the sidelines and let some crooks get away with whatever they want, why have a fake SEC on hand to throw people like Martha Stewart in jail?

And let me nip this in the bud:

There is nothing illegal about shorting stocks. Nor do I interpret every selloff as manipulation and shorting. However, lets be real. When you have a handful of institutions that collaborate at specific times to collectively undermine the normal functioning market, through intense short selling and high frequency trading programs, it is criminal behaviour. Regulators are empowered to investigate such episodes, pull trading tickets to identify the parties involved, and to assess penalties where such obvious market rigging is in play.

We are well past the point of normal market action driven entirely by individual participants acting independently for their own profit. This is a gang rape.

And for clarity, I know of one individual that owned over 1 million shares of a junior. That person wanted to roll those shares from a trading account into a retirement tax free account, without losing a cap loss credit. So he sold the shares in batches of 100,000 from one account, transfered cash to the other account, and bought the same stock in batches of 100,000. These transactions were investigated by the SEC on the assumption that individual was running a scam to try and show higher market volume for the stock. He got the call the same day the trades were executed.

So my point is very simple: if the SEC is so on the ball that they can spot and immediately investigate one benign trading pattern for one stock, how can they be so clueless and inept when the entire market is being played? These regulators are not that stupid. They have been bought and payed for, and instructed to look the other way.

Such scams have a shelf life. It only works if you can induce panic selling and then cover the shorts into that volume on the lows. I think we are very close to the point where all of the juice is squeezed out of this lemon. You can only fleece dumb investors once and most have sold and moved on. Thereafter the shorts will just screw themselves as funds start taking advantage of the price weakness to accumulate the juniors.

I think in the case of ECU we are already seeing the short covering underway, ahead of the potential breakout news for the MS drilling. For many other juniors that process will arrive soon. And then we can look forward to a dozy market through the summer until new money shows up to participate again.

cheers!

mike