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from the trading desk today may 12 - p/jr

edited May 2011 in Off-Topic
• When Two Fools Met: This little commodities move, Treasury decline and equity rally smells like a “Sucker’s Bounce”. Much of the move looks related to a little rally in the Euro after several ugly sessions – much on the headline suggesting further ECB rate hikes. Some key indicators, EUR and Copper among them, are trading below their 200 day moving averages. With health-care leading the move this year, the “risk” trade will continue to come off.
• How can a long and short ETF both be down? With Silver, anything is possible. ZSL (2x short) and AGQ (2x long) are both down on the day. Silver itself is off 2%. How can this be? The answer lies in the timing of the daily rebalance of the ETFs. Both use the 7 am Fixing as their rebalance benchmark. Today at 7 am, Silver was it the absolute lows, so both the long and the short fund had to sell on those lows. Since that print, Silver is up 7.5%. That should mean that both funds will have to buy silver into the 7 am fix tomorrow. If you can, buy some SIA futures now and feed the ducks starting at 6:50 am tomorrow morning. It’s just the overnight risk you need to deal with (no big deal, right??!!). Maybe short some gold to hedge.


  • edited May 2011
    Thanks for the head up JR. An alternative way would be to get in to AGQ and SLV today and sell to bounce tomorrow morning. Still a very high risk play as these ETFs (especially the levered versions) seems to having wild swings.
  • these things are indeed for nimble opportunistic trading -- not for holding.
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