Heavy overnight turnover reached $1351 ever so briefly until the bears seriously showed some resolve to defend the new round number and triggered some stops but frankly it appears more like buyers fading rather than sellers getting out of Dodge. The numbers mostly support this view as GSR dropped almost a full handle to ~58.80 and open interest was virtually unchanged (basis Monday) again confirming to us that this move continues to have a serious short covering component. Option vols are firmer around 17 for spot levels and upwards of 21 for way out of the money. Today: As mentioned yesterday there remain 13,000+ DEC 1350 calls open and those that have written these will clearly try to hold the level. For how long? If they last a day or so it gives them time to re-hedge and the market a breathing spell to work off resolute over-bought levels (RSI is ~85 this morning). But, if we blow through 1350 today the bears should sack their defensive coordinator promptly and momentum will resume...$1380 next? Those of you who follow or own the miners and particularly the junior exploration companies must carefully reassess the market value of reserves as prices work higher. The gearing is very leveraged as evident by recent bids from majors for supply in the ground.
Incidentally Jon, a subscriber asks me to pass on this note:
"I read what that guy Jon writes every morning with a great deal of interest. Please, Gary, pass on to him thanks from this appreciative student." --Barbara
Me again: BTW, I love the 'sack the defensive coordinator' reference, which I can only interpret as an extension of Monday night's destruction of the Dolphins by the Pats' special teams, leading to the sacking of their special teams coordinator by the Tuna immediately thereafter.
