Gold Mining ($GDX) and Job Reports Moving the Market

August 4, 2016
By Vlad Karpel

Stocks are trading in mixed fashion on light volumes into midday Thursday. The S&P 500 has navigated a narrow 8-point range and is flat at 2163.79.

Five of ten market sectors are holding gains, led by Utilities (XLU), Tech (XLK), and Consumer Staples (XLP). Telecomm (IYZ) and Financials (XLF) are notable laggards.

Treasury bonds are higher following mixed data on jobless claims and factory orders. The yield on the benchmark ten-year has eased to 1.49% ahead of payroll data Friday morning.

Crude oil lost 13 cents to $40.70 and gold added $5 to $1369.50.

On the options front, CBOE Volatility Index (VIX) is off .36 to 12.50. Volumes are rather light, with roughly 2.5 million calls and 2.2 million puts traded across the exchanges through the first two hours. Projected volume for the day is 11.5 million and nearly 25% less than the one-month daily average.

Seaworld (SEAS) Jan2018 20 puts and Jan2017 20 puts are the most actives with more than 58,000 contracts traded in each and one player rolling a block of short puts to the 2018 expiration, from the 2017s, as shares dive 14% to 52-week lows on earnings news.

SPDR 500 Trust (SPY) November 216 calls, SPY September Quarterly 216 calls, and VanEck Vectors Gold Miners (GDX) Aug 26th Weekly 28 puts are the next most active options through midday Thursday.

In fact, there is notable interest in puts across a number of gold mining names Thursday ahead of the jobs data Friday. Economists expect tomorrow’s report to show the economy adding 185,000 jobs for July and the rate of unemployed easing to 4.8% from 4.9%.

The report certainly has some market moving potential because of the implications for monetary policy, interest rates, the dollar, bonds, equities, and commodities. An uptick in volatility in the mining names certainly seems possible after the recent surge.  The chart below shows the recent rally in the VanEck Vectors Gold Miners ETF, which holds a basket of leading companies from the sector, over the past few months. It is now up an astonishing 129% year-to-date.

See Tradespoon’s Stock Forecast on VanEck Vectors Gold Miners ETF (GDX)


Tradespoon’s Stock Forecast on VanEck Vectors Gold Miners ETF (GDX)

While the uptrend in shares of the VanEck Vectors Gold Mining Fund remains intact, the options activity Thursday is decidedly cautious. In addition to more than 30,000 Weekly Aug 26th 28 puts on the Gold Mining ETF, 13,000 Jan 28 puts also traded in GDX options. Meanwhile, 21,000 Aug 48 puts traded on the VacEck Vector Junior Gold Mining Fund (GDXJ). One player also gobbled up 5,500 Sep 24 puts on Barrick Gold (ABX). Lastly, Newmont Mining (NEM) Sep 46 puts, Sep 45 puts, and Jan 42 puts are drawing interest Thursday as well.

Heavy put activity in the gold mining ETFs and individual equities is expressing concerns about a potential pullback in the sector and it is probably not a mere coincidence that the positions are being opened ahead of tomorrow’s jobs report. GDX is trading near 52-week highs with resistance near $31.50. Support likely at $31 and $30 per share.

Meanwhile, the S&P 500 continues to face resistance at 2166, 2169, and 2175. Support areas include 2161, 2150, and 2144.

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