Seeking Alpha

Kevin Davitt's  Instablog

Kevin Davitt
Send Message
Kevin brings his unique experience in derivatives to RCM Asset Management. Following graduation (Marquette University – Evans Scholar 1999) Kevin started working for LETCO Trading on the CBOE floor. Between 2000 and 2007 Kevin traded a variety of Equity and Index options products as a market... More
My company:
RCM Asset Management
  • Quick Macro Contrarian Update 0 comments
    Sep 10, 2013 1:52 PM

     

     

     

     
     

     

    ENERGIES | METALS

    By Kevin Davitt

    To discuss this commentary in more detail, e-mail me directly at kdavitt@rcmam.com or call 312.870.1520.

    The Nasdaq continues to make new highs and Fund exposure keeps trending higher (but they tend to be longest around highs and short near lows):

    The put/call ratio in the S&Ps is at the highest level in a year (retail money expects higher prices). There are roughly 45 puts traded for every 100 calls. More than a 2:1 ratio. Careful!

    Conversely, the appetite for puts peaked in mid November last year (S&Ps on LOWS @ 1350). Put skew also popped in mid/late April of 2013 (S&Ps test 50 day moving average @ 1535 - Metals in free fall). Finally, there was a voracious retail desire for puts in mid/late June of 2013 (S&Ps break the 50 day moving average following Bernanke Taper Comments. Emerging Markets tailspin. Bond markets fall out of bed).

    Now, looking at Fixed Income/Bond Funds going into next week's all important FOMC (TAPER) meeting. As you can see, money has been leaving Fixed Income at a rate last seen in Fall of 2008 (pre QE1/Tarp/etc).

    And here's a long term look at the Treasuries Commitment of Traders Report (speculators are SHORT Fixed Income going into Bernanke's penultimate meeting). I wouldn't necessarily advocate for outright longs, but I would be uncomfortable on a boat that's loaded this heavily on one side.

    Finally, I was pounding the pavement about the over-reaction in the Gold (and particularly Silver in late June (and earlier). In my mind, Silver testing $18 and Gold around $1200 seemed like an emotional, liquidating market. The Gold Silver ratio at 67:1 also seemed incongruous. Price and the ratio have been reconciled a bit in the past 8 weeks and they are now largely range bound. This is what the short squeeze looks like in Gold.

    Personally, I don't see a great directional opportunity in the Metals right now. Volatility (implied) in GC and SI was relatively high about 2 weeks ago with 30 day Gold vol around 25% (very high relative to S&Ps) and short dated Silver vol around 45%. In the interim, front month Metals vol has come in to 20% and 35% respectively.

    Today's headlines:

    • Syria seems responsive to Russian overtures that they be given time to turn over Chemical weapons stockpile.
    • Goldman, Visa, and Nike will be included in the rebalanced DJIA (first in years) as Hewlett, Alcoa and Bank of America are excluded (low priced dogs). Keep in mind the DJIA is a PRICE weighted index (poor barometer).
    • Poor Italian GDP as well as French Industrial Production (if you think all is well on the other side of the Atlantic I have some marsh land for sale).

    Finally, be aware of the huge move higher in the Shanghai Index of late (up 15% in about 6 weeks):

    I'm NOT and Equity guy, but the FXI seems like it finds support around 32-31 and congestion between 40-42.

    .....but again, it's ALL ABOUT CHEAP MONEY.....things get rocky when rates spike, particularly when they do so quickly. Here's a look at overnight Shibor. You were rewarded for buying China when "blood was in the water" (borrow rates spiking). Same goes for most Global markets which found support in late June/early July following interest rate pops.

    I don't know if now is the time to buy/hold/or sell, but Buffett was on to something when he said:

    "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

    Kevin Davitt

    Global Execution and Futures/Options Broker

    621 S. Plymouth Ct. Floor 1

    Chicago, IL 60605

    Direct: 312-870-1520

    Cell: 773-732-5197

    Fax: 312-275-8123

    AIM: kpdavitt13

    kdavitt@rcmam.com

    rcmassetmanagement.com

    Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions ("Forex") before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.

Back To Kevin Davitt's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.