It seems as though the story is far deeper than traditional correlation. The US economy seems to be improving and stocks are therefore, at the margin, perhaps a better buy than fear driven gold. Moreover, the Fed is slowly being expected to taper off its extremely easy monetary policy. Some traders were expecting the move however.

            As of Tuesday of last week, there were a record number of shorts in the gold market according to CFTC data. Large hedge funds and other large speculators were holding a record number of short deltas or a record number of positions that would benefit from lower prices. 

            The data suggests that this is the lowest number of speculative net longs in the market since July 2007. The last time there was a record number of high net shorts and low net longs is displayed in the chart below. The chart during this period is rather interesting. The record amount of shorts and the lack of longs may have fuel a massive rally. The chart suggests that after a quick double bottom in July 2007 gold then rallied 30%.

            While the economic and financial backdrop is dramatically different during the aforementioned period, the data and resulting price action is very interesting and calls attention to one-sided thinking. While everyone is looking down, perhaps it is prudent to look up, with a tight stop naturally.

salerno.mark.a@gmail.com

Dollar strength is being felt across the currency and commodity spectrum. Gold is seeing another leg down in price as physical demand remains strong. Gold futures are fast approaching the $1322 bottom put in on 4/16/13.  Interestingly enough, silver bounced yesterday of the $22.00 level which was the low on 4/16/13 too, but is down today by over a percent.

The gold miners again are seeing pressure on the back of dollar strength and gold weakness. In recent news NEM paid a smaller dividend, because gold prices have slid so much and their dividend is a function of gold prices.

The strong dollar is also being seen in the currency market. The Yen is again depreciating against the USD as the USD/JPY popped above 103 and similarly correlated the Nikkei 225 had a great day raging 2.3%. Japan will continue to be in focus as the BOJ pursues massive easing at the expense of the Yen. A way to play this is long YCS; which is the Pro-Shares Ultra Short Yen.

Despite the stronger USD, copper futures are up…perhaps reflecting the better than expected US economy rather that USD strength (where conventional thinking says it should be down as the USD appreciates).

salerno.mark.a@gmail.com

Sina Corporation is set to release earnings today, May 16, after the closing bell.  Even if earnings are a let down many close to the company are planning to use any dip in share price as an entry point.  The value added services platform recently applied to Weibo is expected to become exponentially more profitable as it penetrates the market. If the proliferation of mobile device use in China were to continue at the present rate this could be a highly profitable enterprise.  The VAS addition will likely boost historically low margins, though the business is still in a transitional phase.   Interestingly, a large stake of Sina WeiBo was recently purchased by Alibaba, the most well known of Chinese e-commerce services.  Many investors feel that a long term relationship between the two companies could yield impressive results. 

Sina Corporation is not going anywhere particularly quickly, however in the mid- to long-term it would be hard to argue against their growth and profit potential.  All of their key profit-generating elements are in growth-oriented markets, namely mobile advertising and commerce.  If the company can honestly report an optimistic outlook for next quarter it would seem unwise to ignore SINA’s potential for impressive growth.

bradyr@keeneonthemarket.com