I know most people would not believe in any manipulation theory. But there are even more examples. Stocks are routinely shorted to create phantom overhead supplies. It’s called fails to deliver. Check this article out:

http://www.financialsense.com/fsu/editorials/kirby/2006/1030.html

And here are the rules from SEC:
http://www.sec.gov/spotlight/keyregshoissues.htm

The fails statistics of individual firms and customers is proprietary information and may reflect firms’ trading strategies. The release of this information could be used to engage in unlawful upward manipulation of the price of the securities in order to “squeeze” the firms improperly.

Without providing the fails statistics, these Wallstreet firms continue to manipulate the markets at will in stock markets, not to mention all other mechanisms in option and futures market.

And if you have ever read Ted Butler’s article on silver-investor and understand what he is talking about, you would take your silver home too. How in the world can these brokerage houses sell forward the entire annual silver production? If this continues, they might as well sell forward all the silver and gold in existence on earth, and pocket the interest money.
http://www.gold-eagle.com/gold_digest_00/butler030200.html

Such naked shorting is totally manipulative on the markets because it creates unfair and unsubstantiated supplies of silver or stocks. They are pretty much “making up” the market by creating phantom supplies.

So why is manipulation always about shorting? Because on the long side, the brokerage house’s ammunition is much more powerful. They can borrow incredible amount of money, and/or drive up the market either in the futures/option market, or in the actual stock market. Certainly, in the futures market, they will use the leverage up to 100X to achieve their purpose. In fact, with trillions of derivatives, I won’t be surprised that the leverage factor is more than 1000X.

Most of the time, the prices of anything should be kind of a continuous function, meaning that it changes, but one second after now, the price would be about the same. Well, what I have seen on expiration days on a different story.

Suppose a January futures contract expires this Friday, while February contract won’t expire for another month. You would think that the prices of the two contracts on the expiration date would be very close in price. The fact that Jan contract is expiring simply means that the price is the “spot” price, and since February is not so much further out, the price would be very close to January expiring contract.

Well, these market manipulators forced the Jan contracts down on the last day to their benefits. Similar to option trading, there can be an optimal price on the expiration day to render the total value of the call/put options to be minimal. So what happened was Jan contract would be trading at $58, while Feb would be trading at $60, which was simply too excessive.

Since the futures contracts may be expiring for USO ETF, they are forced to sell their Jan contract for $58, while rolling over to the next month at $60. For every contract that they roll over this way, they will need to eat up a $2 loss in the fund value.

I know for sure that such excessive spread happened in one of the months from October to December, and probably has happened very often to let USO lost some $10 in its fund value.

Here is another example. Tell me why would a “computer” sell for $500 this Friday, but will sell for $600 next Monday. Note that both $500 and $600 prices are available on Friday simultaneously (because different dated futures contracts are all actively traded), except that the condition for $500 price is that Friday is the last day. When a “vendor” like USO have expiring contracts to sell on Friday, USO will be killed to eat up the $100 price difference because they are forced to sell on Friday and can’t sell them next Monday.

Note, we are talking about crude oil!! What kind of difference does it make between any Friday and a Monday? Everyday, people drive, and refineries refined. A $2 price difference between the two dates are ridiculously manipulative.

Sorry about that, but I don’t exactly see how the market manipulation is coming into the picture? Can you say a bit more about that?

Thanks,

James

You MUST open a futures trading account. Manage your own rollover of contracts. Recently, I’ve seen at least two examples of terrible market manipulation near or on the days of expiration. Those are not the days that you want to roll your contracts over.

Instead of USO, may I suggest U.TO instead. It’s a holding for uranium. There is no GLD equivalent for oil unfortunately.

Much like Rich, I keep USO as the top ticker in my Yahoo! protfolio strip to get an idea of which direction oil is going for the day. Of course, it tells you NOTHING about how much it moves.

I’d stay away from USO too. If there were an oil ETF like GLD that tracked the commodity within a few pennies, it might be worth looking into.

Grant

http://www.financialsense.com/fsu/editorials/2007/0112.html

Rolling over contracts (in USO) are simply not good for you.