On July 1st Gold commodity prices dropped sharply, over 4% in one session, causing Gold related ETFs such as SPDR Gold Trust ETF (NYSE:GLD), ETFS Gold ETF (NYSE:SGOL), and the iShares COMEX Gold ETF (NYSE:IAU) to plunge through their 50 day Moving Averages. This move came abruptly, as the ETFs previously had traded above these levels continually since the beginning of April as Gold followed a steady uptrend, relatively uninterrupted for months on end. On July 2nd, Street One market technician David Chojnacki, who had previously been technically bullish (NYSE:GLD) since mid April around the $111 price level, updated clients that (NYSE:GLD) “broke down last session below two important levels of support ($120.70 and $117.25) and is “no longer a buy at these levels.” Last week began with further weakness in Gold, with (NYSE:GLD) trading as low a $116.10 before rebounding to end the week and bumping up against its 50 day MA which was formerly support and is now new resistance, and closing below it, at $118.36. Action has been similar in Silver ETFs, as the iShares Silver ETF (NYSE:SLV) and ETFS Silver ETF (NYSE:SIVR) sharply sold off on July 1st as well, and have followed a similar path since, as the Gold products.
Despite the choppy action last week in the Gold and Silver commodities themselves, institutional options players seem to be positioning for further downside in Gold and Silver Mining stocks, perhaps believing that the weakness in the commodities is an impetus for a reversal of the longer term technical bullish strength in the Gold and Silver commodities and miners. In XAU (Gold and Silver Index), bearish combos have traded in the September 165, 170, and 175 strikes. In these trades, the institutions are buying puts and selling calls simultaneously, taking an outright short position in the index through the options with these strikes. XAU is composed of 16 Gold and Silver Mining companies including sizable weightings in (NYSE:ABX), (NYSE:GG), (NYSE:NEM), (NYSE:FCX), and (NYSE:AU). XAU is an index, and not an ETF itself, so those looking to make a play on the Miners and unable or unwilling to invest in XAU options will need to look elsewhere. There are a handful of ETF alternatives that provide exposure to Gold and Silver Miners. The Market Vectors Gold Miners ETF (NYSE:GDX) owns 31 Gold Miner names and tracks the NYSE Arca Gold Miners Index, with the largest weightings being in (NYSE:ABX) 16.29%) and (NYSE:GG) 12.36%. The Global X Silver Miners (NYSE:SIL), is a newer ETF to market, but has been received well as far as trading interest and asset inflows, gives exposure to the Silver Miners by following the Solactive Global Silver Miners Index. The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) provides exposure to small and mid cap Miners, for those looking to diversify away from the large cap miner names. The SPDR Metals and Mining (NYSEXME) also falls in this camp to some degree, although the ETF holds companies that fall outside of the Gold and Silver Miner sectors, including some Steel and Coal names such as (NYSE:NUE), (NYSE:BTU), (NYSE:AA), and (NYSE:STLD), so the ETF will only peripherally trade with the rest of the group.
We will continue to watch the technical trends in the Metals and Mining sectors closely, as well as institutional option positioning to attempt to gauge if the recent shakeout was simply a bump in the road in a longer term bull market, or perhaps a bearish reversal of a longer term trend.
SPDR Gold Shares (NYSE:GLD)
iShares COMEX Gold Trust (NYSE:IAU)
iShares Silver Trust (NYSE:SLV)
ETFS Physical Silver Shares (NYSE:SIVR)
Global X Silver Miners ETF (NYSE:SIL)
PHLX Gold/Silver Sector (^XAU)
Market Vectors Gold Miners ETF (NYSE:GDX)
Market Vectors Junior Gold Miners ETF (NYSE:GDXJ)
SPDR S&P Metals & Mining (NYSE:XME)
ETFS Physical Swiss Gold Shares (NYSE:SGOL)
Street One Financial LLC (S1F), is a full service shop specializing in ETF’s, equities, and options. S1F UTILIZES THE BROKER/DEALER SERVICES of Emerging Growth Equities (EGRO), a registered Broker Dealer and member of SIPC/FINRA. S1F specializes in agency ETF/ETP, equities, and options trade execution. On the ETF/ETP end, S1F works with the ETF issuers to understand their products thoroughly and how they can complement an investor’s portfolio. We assist portfolio managers in constructing their portfolios and identifying which ETF provides the best desired exposure by portfolio objective, fees and ease of trading. The ETF/ETP landscape is evolving rapidly and has diversified quickly beyond passive equity index ETFs. Now actively managed strategies, fundamental and quantitative ETFs, as well as those that offer exposure to Fixed Income, Commodities or even Volatility Indexes are available to investors. That said, understanding how specific products work and where they fit within portfolios and perhaps more importantly, “how to trade” these products, has become something of major importance to portfolio managers on all levels. At S1F, we assist portfolio managers in screening by true underlying liquidity, not “shown liquidity” or “perceived liquidity” as reflected by average daily trading volume. S1F then sources liquidity without identity or information slippage, through all available access points in the marketplace to minimize the market impact of the trade, delivering a lower total cost of trading to the portfolio manager. This allows the portfolio manager to, in essence, recapture basis points on each trade, and outperform their competitors over the course of the year, while maintaining a competitive edge over their peers. All trades executed by Street One are cleared and settled with NFS/Fidelity.
This communication is not intended to constitute any offer or solicitation to buy or sell securities. All trading and broker dealer services are through Emerging Growth Equities, Ltd (EGRO), Broker/Dealer and member of SIPC, FINRA (www.egequities.com). For more information, please contact us at: 877-782-8353