I am going to take a quarter of my Powershares DB Gold Double Long (DGP) off into a nice 2.5 week run, as gold approaches $1000. This is a nice round psychological number that generally causes some retraction. If it doesn't and we just continue up, I still have the majority of the position here. The Gold ETF (GLD) (DGP returns double GLD) has rallied from $90 to $97 in the past 2.5 weeks on 'reflation' and prominent hedge fund managers showing their hand. [May 16, 2009: John Paulson Continues to Pile into Gold]
I added to this stake on May 15th, so I am simply taking part of that purchase back and locking it in. Taking the position down to below 2% with this sale. I noted the silver ETF in that piece as very interesting (around $13.80 at the time) and indeed that was the slightly better play in retrospect.
Gold Miners (GDX) are also muy caliente
I see a lot of 'parabolic' action out there (esp in speculative Chinese small cap and commodities). In normal times this would kick in my 'contrarian' antennae. I also see a lot of complacency on the long side - that would also normally raise my 'complacency' radar, but being contrarian has only gotten the stuffing knocked out of you the past 3 months. Even being a bond bear, I'd like to go long bonds for a very short time as the downdraft seems very overdone near term, but I like keeping my stuffing inside of me.
So unlike in the past when I'd say it feels like a keg party out of control and I can hear the police off in the distance, this time it appears the government has the police locked in their own jails while they do their "work" (notice the futures went from negative to flat again Tuesday morning? - so many "buyers" want in this market before 9:30 AM day after day.) Maybe we'll see them again at 3:30-3:45 PM! But only if we are good little bulls. Party on Garth.
p.s. historically the previous leaders (commodities) of a market, are not supposed to be the same leaders the next time around.
p.s.s. a lot of historical rules have been blown up the past 2 years
Disclosure: Long Powershares DB Gold Double Long in fund; no personal position