Dan: In 2008 I remember Jim saying that even he was surprised by the ferocity of the mining shares drop due to the massive delveraging. Is that not a real possibility now as well, since so much 'cheap money" is the only reason for the s& p highs of today, followed by commodities? or is a decoupling more likely this time for the shares (hui)??-Thanks ED
No way this is 2008 all over again. That said, the miners have no put in their worst ten days in very long time. Seriously Trader Dan, and with all respect, if these hedge trades long the metal/short the miners are in place, logically, the miners should get a bid with the metals tanking. I mean, that is just pure and simple logic. The miners should rally according to the hedge fund trade as outlined here and elsewhere.
SSK - no, they do not have to rally at all. If anything they can go down even faster than the metals themselves. That trade strategy is not static; it is dynamic, and is adjusted according to market conditions. That is "the logic" behind the trade. It is not called a "ratio trade" for no reason. The ratio of long positionsn to short positions is constantly being adjusted.
That being said, one can watch for a point where the HUI and the XAU start getting a firm bid to see where the end of this latest reaction will occur.
Watching PM trading in Asia, looks like the gold stock investors were correctly anticipating a major selloff. Looks as if gold has lost $1,500 again.
ReplyDeleteDan, would you please opine about why the miners are doing so poorly in relation to the metals?
ReplyDeletePeter,
ReplyDeleteCheck out Dan's post called "Hedge Fund Ratio Spread Trades Continue.
Dan:
ReplyDeleteIn 2008 I remember Jim saying that even he was surprised by the ferocity of the mining shares drop due to the massive delveraging. Is that not a real possibility now as well, since so much 'cheap money" is the only reason for the s& p highs of today, followed by commodities? or is a decoupling more likely this time for the shares (hui)??-Thanks ED
No way this is 2008 all over again. That said, the miners have no put in their worst ten days in very long time. Seriously Trader Dan, and with all respect, if these hedge trades long the metal/short the miners are in place, logically, the miners should get a bid with the metals tanking. I mean, that is just pure and simple logic. The miners should rally according to the hedge fund trade as outlined here and elsewhere.
ReplyDeleteSSK - no, they do not have to rally at all. If anything they can go down even faster than the metals themselves. That trade strategy is not static; it is dynamic, and is adjusted according to market conditions.
ReplyDeleteThat is "the logic" behind the trade. It is not called a "ratio trade" for no reason. The ratio of long positionsn to short positions is constantly being adjusted.
That being said, one can watch for a point where the HUI and the XAU start getting a firm bid to see where the end of this latest reaction will occur.