BIG MONEY MOVING INTO COMEX GOLD & SILVER CALL OPTIONS

4/29 Adrian Douglas -

In November 2005 when gold was trading about $450 I predicted the mega-move in gold up to $720/oz by noticing a very large build-up of call options in the HUI component shares http://www.marketforceanalysis.com/Pubished%20Articles/assets/Explosive%20Rise%20in%20Gold%20Mining%20Shares%20Coming.pdf)

In August 2007 I identified a massive Gold call option build-up in the COMEX DEC 2007 contract and predicted a big gold move (http://www.marketforceanalysis.com/Published_Articles07_assets/COMEX%20GOLD%20OPTION%20OI.pdf ). Gold was trading at $660/oz at the time and ran up to over $1000/oz by March 2008.

In July of 2008 I noticed a similar build-up in the COMEX December Call options indicating a major upward move in gold before the end of 2008. Considering what transpired in the financial markets from July to December 2008, after I made this prediction, it made perfect sense. We now know, however, that two large banks, probably JPMorgan and HSBC, sold a massive amount of futures short in July 2008 equivalent to 10% of global gold production and changed the intuitive direction of the gold market into a counter-intuitive one. As a result the CFTC was obliged to take note and commenced an investigation into both the silver and gold markets on the COMEX for manipulation. So I think a rain-check is deserved on the 2008 market call until the CFTC officially declares the manipulation or the market blows up (I think the latter will happen before the former!) (more)

MarketTrends: May 4, 2009

Issued by Colin Cieszynski, CFA, CMT, Market Analyst, CMC Markets Canada

North American Indices and Commodities: Equities and Commodities Rally on More Signs of Stabilization

North American markets have been rallying again today on the back of positive economic data out of the US. Construction spending rose by 0.3% in March when the street had expected a 1.6% decline and pending home sales rose by 3.2% when a flat reading had been widely expected. This news appears to have given indices enough of a tailwind to break through last week’s highs and confirm the start of a new upswing trend. For example, the Dow Industrials (US30 CFD) broke through 8,200 resistance last week, successfully retested it as a new support level and today blasted through resistance at 8,275. Similarly, having successfully overcome and retested the 875 level, the S&P 500 (SPX500 CFD) has rallied toward a test of 900. Next major resistance levels appear near 930 for the S&P and 8,500 then 9,000 for the Dow on trend.

Commodity markets have also been climbing today. Copper has retained the $2.10/lb level and appears to be trending toward a retest of resistance in the $2.20-$2.25/lb zone. US crude has also been picking up, breaking through $53.00/bbl resistance with next resistance closer to the $55.00 level. Both of these rallies suggest that investors may be starting to anticipate a stabilization or recovery in demand for global resources. Grains have been giving back some of Friday’s gains, but $4.00/bushel for corn and $5.40/bushel for wheat appear to be emerging as new higher support levels.

Precious metals have shown surprising strength today with gold breaking through $900/oz and silver blasting through $12.50/oz and challenging the $13.00 level. Recently precious metals had been sliding as their role as a safe haven had been diminished as fears eased and investor confidence improved. This rally suggests that investors may once again be starting to be concerned about the potential for renewed inflation from all the government and central bank bailout and stimulus measures of the last several months.

Canadian equity markets appear to be a big beneficiary from increased interest in shares and commodities today with both the S&P/TMX Composite and the S&P/TMX 60 (Toronto60 CFD) staging significant breakouts today. The Composite broke out of a 7,900-9,600 channel/base that had been forming since November today and now faces a major resistance near 10,000, a key psychological level that coincides with a test of the 200-day average. The 60, meanwhile, broke through 575 resistance today and faces its next significant resistance zone in the 600-620 area.

The big economic news expected this week include the employment reports for Canada and the US, which are both due on Friday. Other significant reports for Canada include Building Permits and Ivey PMI (Wednesday) and Housing Starts (Friday) In the US, other major releases include ISM Non-Manufacturing PMI (Tuesday) ADP Payrolls (Wednesday) Jobless Claims and Consumer Credit (Thursday).


Canada and US Share Update: More Signs of Stabilization At The Corporate/Industry Level

It has become increasingly apparent over the last two years that interest rate cuts and government stimulus/bailouts can be viewed as signs of weakness. It has also become clear that one of the early signs that the credit crunch is easing or of stabilization in the global economy would be when corporations are able to start spending again or rehiring workers. In Canada, these signs have started to appear. Recall last week that Porter Airlines announced a big investment in Toronto, while Tim Hortons (THI CA) announced a big new plant investment in Hamilton. It now appears that this may be spreading outside the Golden Horseshoe.

Today, Canfor (CFP) has rallied 12.3% and broken out of a base that had been forming below $6.00 after the company producer announced that it plans to restart operations at its MacKenzie sawmill this summer with one shift. Next resistance for Canfor appears near $7.00, then near $7.75. This continues to indicate improvement in the forest products sector as International Paper (IP) has rallied another 10.1% today after last week’s positive earnings reports.

Sprint Nextel (S) has jumped 12.5% today after the telecom company reported EPS of $0.03 for last quarter when a ($0.04) per share loss had been widely expected. Having broken through $5.00, the next resistance for Sprint appears in the $5.75-$6.00 range.

Coal and steel producers appear to be particularly benefiting today from improved attitudes toward the global economy. Among coal producers leading gainers include Massey Energy (MEE) up 18.4% and Peabody Energy (BTU) up 9.3% in the US and Western Canadian Coal (WTN) up 11.3% and Teck Cominco (TCKb) up 7.7% in Canada. Leading steelmakers today include Gerdau Ameristeel (GNA) up 11.4% in Canada and AK Steel (AKS) up 11.3% and US Steel (X) up 8.4% in the US.

Gold isn't going to $2,000 an ounce

Jeff Clark, Editor, BIG GOLD
Casey Research snippet
May 4, 2009

Gold isn't going to $2,000 an ounce.

Before you gag on your coffee or suffer chest pains, allow me to explain.

We're about eight years into the bull market, and gold has breached the $1,000 level twice and has spent weeks trading above the old high of $850. Some observers are now saying that gold's pretty much had its day and that once the recession is over, it will retreat for good.

However, the four-digit gold price we've seen so far is with no price inflation to speak of, no effects of the atrocious increase in the money supply, and despite a rising dollar. What happens to gold when each of those pictures gets turned upside down - high inflation, excess cash jolting the economy, and a falling dollar? After all, gold's performance to date has been powered only by general anxiety, not by any visible erosion in the dollar's value.

I decided to take a fresh look at calculations that could be used to appraise gold's upside potential. No one of them, by itself, comes with compelling logic. But they all point in the same direction. (more)

HES Radio show May 1 ,2009

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