Wow! You can't make
up this much two-way action except with a roulette wheel. For the tourists, Da Boyz got the DJIA back
to 10,000 but volume was again relatively light which is mystifying. Once again shorts are squeezed and this
two-way action is difficult for most investors to either trade or comprehend. The action today was based on "better than
expected" lousy numbers from CSCO and lower Jobless Claims (which, by the way, are
This post will be shorter than most as my time is
constrained but the employment number tomorrow is more important and should further
encourage bulls or bears. The
interesting story in this post is what's going on with UUP
which is highlighted below within Uncle Buck's section.
Volume was below recent levels while breadth was excellent.
Below is a press release in part from DB Commodity Services regarding
a filing to issue more shares in UUP
COMMODITY SERVICES FILES WITH THE SEC TO REGISTER 100 MILLION ADDITIONAL SHARES
OF POWERSHARES DB US DOLLAR INDEX BULLISH FUND
November 5, 2009 DB Commodity Services LLC today announced it has filed a
registration statement with the US Securities and Exchange Commission (SEC) to
register 100,000,000 additional shares of PowerShares DB US Dollar Index
Bullish Fund (NYSE Arca: UUP
) in order to meet investor demand. Creations of
new shares in the fund are temporarily suspended pending clearance of the
registration statement by the SEC, the Financial Industry Regulatory Authority
and the National Futures Association and declaration of the effectiveness of
the registration statement.
information is contained in two related 8K filings which are available at: www.sec.gov
. DB Commodity Services LLC."
Below is the explanation of this activity courtesy of Scott Larison
of Forefront Advisory
"The demand for UUP
NOV 23 calls
the past week may be related to a Hedge Fund taking a shot on the Dollar
bottoming out. Open interest in these calls has skyrocketed the past week and
is registering nearly 300k contracts or nearly $30 million in underlying value.
As customers buy these calls, market makers who sell them must buy stock to
hedge these call sales. Here is the past 10 day volume of the calls vs puts,
and the open interest of the calls and puts. AVGATM VOL = Average at the money
implied vol of the front mo options- notice the spike."
Puts CallOI PutOI AvgAtmIV Close
8631 563 274k 36k 13.6% 22.31
19k 488 280k 37k 11.4% 22.43
69k 4352 295k 37k 14.1% 22.58
65k 863 352k 41k 13.2% 22.64
10/28 183k 2879 393k 41k 13.7% 22.73
28k 3249 552k 43k 12.5% 22.57
46k 2644 566k 45k 13.3% 22.70
11/2 44k 160 596k 46k 17.4% 22.62
11/3 45k 322 621k 46k 14.0% 22.68
11/4 403k 2822 630k 46k 15.4% 22.51
bets pay-off for the speculator(s) it would be a negative for gold and other
commodities as well. But, somebody has
wind of something to cause the dollar to rally whether it's from central bank
interventions or a policy change or….? Certainly, not all hedge funds are perfectly
smart but, as we've seen lately, they're better "informed".
The market has lost its dominant trend the past two months
substituting lots of action but no real progress. That will change eventually but no one likes
trading range markets. Just when you
think markets are starting in one direction we reverse course. Clearly, after a 50-60% gain from March lows,
consolidation is not unexpected. I'd be
most careful of January since bulls may prop things artificially through the
Most interesting today is what's going on with UUP
Who is making these big bets?
What information do they have we don't?
We'll find out eventually but if these speculative positions payoff for
them it could upset a lot of positions particularly in commodities and perhaps
Emerging Markets as well.
This post is deliberately short due to other
commitments. The employment data
tomorrow is important and doing a good job of analyzing this currently is Jesse's Café Americain
. I suggest you give it a read.
Disclaimer: Among other issues the ETF Digest maintains
positions in: VTI, XLE, GLD, DGP, EFA and EEM.