Gold, despite bouncing off of recent lows on Friday, still continues to see outflows on rather heavy volumes, as GLD (SPDR Gold Shares) lost about $700 million to redemptions. Our market technician David Chojnacki points out that gold has broken its longer term trendline, not to mention it is now trading below its 200 day moving average, a level it has not breached, or really did not even come close to touching until the recent fallout that began several weeks ago.
Recently, we have seen a persistent trend of institutional ETF and options players looking for long exposure to the U.S. dollar via UUP and call options in UUP (PowerShares DB US Dollar Bullish), and we highlight $200 million leaving FXE (CurrencyShares Euro) this past week, which basically reflects the same sentiment as those looking for long U.S. dollar exposure. [Dollar, Euro Currency ETFs]
FXE put buyers, as well as call buyers in EUO (ProShares UltraShort Euro) have also been present in recent weeks, and the flows have been rather consistent regardless of where spot euro versus the dollar has been from a day to day basis. A number of equity sector based funds also saw redemptions last week as investors seem to be rotating out of select sectors going into 2012.
Going into the first week of 2012, we will be mindful of where the VIX takes us in the early going and will also look for signs of directional ETF/index options flows which may provide some clues on where institutions are positioning themselves for the first quarter of the year, as these players have been largely absent from the markets in the past two weeks due to the holiday slowdown.
CBOE Volatility Index
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