2010-10-11

Dollar bottoming, Gold and Silver topping, and equities probably topping too — the deflation trade to resume sooner than most believe

Commitment of Traders, what they reveal on the treasury bubble:
There are now, according to the latest Commitment of Traders report, 79,796 short contracts on U.S. Treasuries on the Chicago Board of Trade, and there are 78,361 long contracts. So how is that a bond bubble exactly?
Commitment of Traders, what they reveal on gold and silver and copper:
There are now 70,638 speculative long contracts on the Chicago Mercantile Exchange for the euro, versus 35,308 net short positions. Come again? There are twice as many bullish positions on this piece of you-know-what as their bearish contracts? Yikes! The dollar is hugely oversold here.
And there are now 297,272 net speculative long positions in gold on the COMEX compared with 39,623 net shorts. This has become a very crowded trade, my friends. Silver is far less on the radar screen.
There are also nearly twice as many speculative bulls as there are bears with respect to copper. The global boom trade is on.
Sentiment on gold and silver via Trader's Narrative:
The Daily Sentiment Index for gold hit the critical 90% level this week, as it did for silver (95% DSI) last week. While the 90% DSI doesn’t mean that gold has to suddenly reverse course, it is another sign that things are getting overheated in the short term. The whole commodity complex right now is arguably very frothy with major bullish sentiment accompanying rallies in silver, cotton, wheat, corn, sugar, oats, etc.
On the USD:

I believe that the USD has bottom against the EUR at 1.40. I don't have any position yet, but considering getting long the USD.
ZeroHedge published the summary of the past 5 weekly selling to buying ratio data points:
This indicator tends to show that insiders see no upside for the share of their companies, and most of the time, they are in a better position to know than many analysts.

Conclusion? All the stars are aligned for a sudden and abrupt resumption of the deflation trade, with the USD soaring, and all other assets collapsing. I'm pretty sure this will happen irrelevant of what the Fed will announce in terms of QE2.

2 comments:

CarDogg said...

When they print the dollar like it's toilet paper - you can be sure gold and silver are goin' up!

http://joshuagamen.wordpress.com/2010/10/05/blowing-bubbles/

http://www.youtube.com/watch?v=Ru7vy8xKSVE

pej said...

[Note: deleted one comment that was a duplicate]
CarDogg, I'll post more on this tonight or tomorrow, but I certainly dont think gold is going up, and that has nothing to do with printing dollars.