As the country spends the next 8 hours pouring over defensive formations, coaching prowess, and fantasy football points, traders are eagerly waiting for Gold futures to open. Open where you ask? Gold took a beating last week and there are many positioned for some kind of bounce going in to next week.
Looking at the above chart I can’t help but visualize a digital graveyard with tombstones haphazardly bunched together of deceased $130 and $135 Call buyers. All the tombstones read, “Here lies everyone who followed George Soros and over-levered buying Gold”
The gap down Monday laid the foundation for a massive overhead supply washout from the above’s dearly departed.
But this is the stock market and your luck can change overnight. The aggressive sell-off has attracted all the knife catchers and they are currently throwing size out on call options with short expirations looking for that inevitable bounce. I say inevitable, because it is inevitable. Time is always the X factor though.
Most of these call buyers are going after the October 14 expiration as well as the monthlies and focusing on the mining ETFs. The mining ETFs trade higher volumes and you can make good percentage gains provided your timing is on point. With the market in heavy consolidation, it will be difficult to time this move so we’ll continue to see knife catchers hit the tape on Monday no doubt regardless of where Gold futures run overnight. Folks, when participating in a knife fight, there’s a certain level of feeling around and stabbing in the dark before you puncture the mid section of your opponent. Best advice I have is buy yourself some time and prepare yourself for bleeding before you win the battle.
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