Paper bought 996 MW Jun 34 Puts for $1.90 (3 times usual volume) with stock at $34.57
Paper sold 8,820 RAD Jul 2.5 Puts for $0.10 (2.8 times usual volume) with stock at $2.94It 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.
Paper bought 1,250 ARCP Jul 17.5 Calls for $0.75 (7.1 times usual volume) with stock at $17.68
Paper bought 951 WCG Jun 60 Calls for $0.65 (3.4 times usual volume) with stock at $54.17
Paper bought 19,798 LIFE Nov 75 Calls for $0.60 (4.1 times usual volume) with stock at $73.55
Paper bought 3,200 JRCC Jun 2.5 Calls for $0.45 (13.6 times usual volume) with stock at $2.62
Paper bought 2,012 GT Jun 15 Calls for $0.50 (2.5 times usual volume) with stock at $14.75
Paper bought 1,730 ATLS Jan 40 Puts for $1.70 (2 times usual volume) with stock at $52.58
Paper bought 19,798 LIFE Nov 75 Calls for $0.60 (4.1 times usual volume) with stock at $73.55
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).
