I think for sure some of the larger PM sector leaders like SLW and G have been influenced to the downside by the options expiry. The call options are sold by the big funds to generate income and they are not afraid to short the hell out of the stocks to make sure they protect the big open strike prices. Look how SLW has been capped and driven lower every time it has challenged the $40 range for the last few weeks. This is not normal trading activity, buyers and sellers acting independently and in balance. The short interest in SLW has been rising and accounts for a huge chunk of the daily trading volume. Its pure manipulation by some funds with very deep pockets that are willing to lay on a huge bet to be sure SLW stays within a range for a few more days. I have $7000 worth of $42 SLW calls that will expire worthless, a big loss that I consider part of my tuition to play in that sandbox. But the bright side is the shorts will unwind after the options expiry and that means a rally in those stocks.

What the bigger market leaders do tends to affect the trading for the entire sector. People react to all the double-top nonsense, bearish HUI charts, and steep selloffs in the metals. All of that can be arranged and rigged through high volume trading, the kind of liquidity that retail investors collectively cannot manage but heavily leveraged institutions can and do put on. Unloading tens of thousands of contracts in silver represents millions of ounces of paper metal - and with the margin increases that adds up to serious cabbage. But the payoff comes from shorting the hell out of the juniors and watching the investors panic and sell. Believe me, crime pays.

Meanwhile investors that would otherwise be buyers now are scared into standing by, because they interpret this market action as a sign that lower lows are coming. If I had a dollar for every bearish interpretation that was a false signal I would be rich already. Think how often there have been head-and-shoulders tops, support levels breached, or some obscure trading formation that predicted a disaster. Most of the time this sort of thing has done nothing but scare people from making buys at the best price range. High frequency trading is accounting for most of the market action in any given liquid stock, and the smaller juniors are just following along for the ride.

Just consider SVM. The short interest spiked by many millions of shares, and then the stock dropped about $3 this week alone. That is tens of millions in profits for the hedge funds that are quietly covering right now as the silver price has also been crushed. Not to mention the premiums on call options that were sold and are now about to expire worthless.

So I do not over-react to the nonsense and the fear in the markets. Its a rigged game. Just last week we were hearing about the impending collapse of the Eurozone and now its about stability returning. Its all spin. They run the markets higher and suck in the retail schmucks, and then crash the markets to rake in huge profits and go long again. Wash. Rinse. Repeat...

I bought a bit more gold and silver bullion today. I have been buying the dips in the shares for the last week, as I do every month or so. Once the funds have finished screwing everything that moves they will cover the shorts, start buying long, run the markets higher and start the whole process over again. I will be selling my extra traders into the rally early in October and be ready to buy the dip later that is sure to come. I do not really care if the shares drop even further tomorow or early next week. There is no way that bullion will trend lower for more than a short correction in my opinion and the mining stocks have been outperforming the metals for the last couple of weeks. Buy the dips and be happy to get a shot to accumulate cheaply.

cheers!

mike