Glittering

First off, a hearty thank you very much to everyone who responded to yesterday's call for help.  With any luck,  Macro Man will be able to enroll several of you to lend a hand which will prevent him from being an ever-present thorn in your sides.  He is much obliged.

Yesterday's  market action was generally quite listless.   Whether punters were nervous that Janet Yellen would emerge from the White House armed with a monetary bazooka, were concerned about the onset of earnings season, or were reluctant to slap on fresh risk ahead of the this weekend's key oil summit is up for debate.  What is clear, however, is that most asset prices didn't show much giddy-up.

That oil continued its recent bounce was perhaps not a surprise; there seems to be some guarded optimism that next weekend will draw a line in the sand to support the crude price.  Macro Man is somewhat skeptical but will admit that this is largely a tourist's view, so he isn't risking any capital on it.  You'd think that last month's highs around $42 or so should offer stiff headwind ahead of the summit.

While gold also enjoyed a solid day yesterday, the real star of the day was Macro Man's old friend GDX, which rallied some 6.5%.  He sold a third of his position just above $20 during that mass of consolidation last month; it seems safe to say that the consolidation period is over.  Although last year's high near current levels yeah encourage a bit of a pause today, above there it's little but fresh air for another $4 -$4.5. 

It's worth highlighting again by just how much GDX has under-performed the underlying.  Some of this could well be a currency effect; virtually all of the largest members of the benchmark index are foreign-listed, which means that GDX owners are also taking risk being long CAD, AUD, ZAR, etc.  Of course, that cuts both ways, and with the dollar sagging recently it's all been sweetness and light.  If Dilma's potential impeachment goes through, that could potentially provide a further positive impact to beaten down commodity currencies.

Obviously the higher it goes the more downside risk there is (the reason that Macro Man liked it to begin with was largely because of the technical set up), which warrants caution. But with such a massive underperformance gap versus both the underlying and its own history, Macro Man still likes the upside- particularly if the Fed remains willing to play fast and loose with inflation.

It's true that all that glitters isn't gold...sometimes it's the drill bit of the gold miner.