Gold: Isn’t the Whole Idea to Buy Low and Sell High?

Isn’t the Whole Idea to Buy Low and Sell High?

Authored by Adam Baratta

When it comes to the gold market, perhaps the old saying should be changed to “buy low and sell high-if ever.” That is likely the mentality behind gold investors at this point, as the yellow metal remains stuck in a trading range.

The gold market has some issues working against it currently. Higher stocks, a stronger economy and overall robust appetite for risk are all playing a role in the market’s current lack of upside follow through. In the absence of any fresh, bullish catalyst, gold could remain on the weaker side of the ledger going into the New Year.

Such a view is, however, dangerous as it does not really examine the bigger picture. If there were no significant reasons for gold to eventually start moving higher, the market would likely have sunk far below its recent lows by this point. Despite short sellers and others taking a bearish view of the metal currently, the market has held its ground. This is undeniably a sign of underlying strength.

Investors have an interesting tendency to view gold very differently from other asset classes such as stocks, for example. But in many ways, some of the same investment principles still apply. For example, if you were a long-term investor in Microsoft, would you rather buy shares at $25 per share or $30 per share? Obviously, buying the stock at $25 per share would be preferable, allowing the investor to potentially realize more gains if the price goes up while also possibly making better overall use of investment capital.

The gold market is no different in this regard. While many investors seemingly want to wait and see the market moving higher before taking action, the savvy investors realize that the old notion of buy low and sell high still applies. This is exactly why the market has not been able to really breakdown-the buyers have met and neutralized any significant selling pressure.

For the investor that is interested in value, and is taking more of a long-term view rather than a short-term view, the current range in the gold market could represent an excellent long-term buying opportunity. The market has shown time and time again that it has the ability to move sharply higher in a short period of time, and the next upside breakout could see such price action once again. Would you rather buy gold at $1250 per ounce or $5000 per ounce?

Now is the ideal time to add to a gold portfolio, and if you don’t already have an allocation in this key asset class, now is the ideal time to get started.

Adding physical gold to your holdings has never been easier than it is today, and you can get started by simply picking up the phone. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to make this asset class a key part of your portfolio using an IRA account.

 Read more from Adam at Advantage Gold

Chinese Liquidity Dries Up: Stocks Hit 3-Month Lows, Tumble Most Since June 2016

It appears The National Team is taking a well-earned break as Chinese stocks extend their losses from late last week in the biggest 3-day drop since June 2016.

 

Breaking below a key technical support level...

Chinese shares were already on a shaky footing after last week when investor confidence was sapped by fresh government steps to reduce financial risks, and a rout in the bond market; but three straight days down with no aggressive "management" buying is unusual...

 

With the Shanghai Composite back to its lowest since August (when China"s National Team - aka state-backed investor China Securities Finance Corp - announced it had boosted its stake in the entire brokerage sector)...

 

At the same time, short-term liquidity markets are showing serious signs of strain as 1-month HKD HIBOR spikes to its highest since Dec 2008...

 

And South Korean stocks plunged most in 3 months...as tech shares slumped following an analyst’s report suggesting the memory chip “super cycle” would soon fade, led lower by Samsung Electronics.

 

Something has changed!

Biggest Short Squeeze In 11 Months Sends S&P 500 Surging Above 2,600

Equity investors, corporate boards, and momo machines are panic-buying stocks this morning, sending the S&P 500 above 2600 for the first time ever... as the yield curve crashes to decade flats...

VIX down, Stocks Up...

 

While USDJPY momo is helping, stocks are quite decoupled...

 

And so are bonds...

 

But it"s all about the squeeze... the biggest short squeeze since December...

Gartman: "We’ll Not Hesitate Even For A Moment To Return To The Short Side"

Gartman does it again.

Yesterday we reproted that with futures spiking, and the S&P set to open just shy of 2,600, Gartman panicked, and closed out his shorts, instead predicting a "violent, parabolic" move higher.:

We have been wrong… badly… in taking even a modestly bearish view of the global equity market and effecting that bearish view via a position in out-of-the-money puts on the US equity market bought a week and one half ago. Fortunately we effected that bearish view with puts rather than with direct short positions in equites and/or via short position in the futures themselves, so the damage wrought has been minor. But the real damage is that we are not long of equities as obviously we should have been. Our position has to be covered and covered it shall be, for we fear that we are about to enter that violent… and ending… rush to the upside that has ended so many great bull markets of the past. At this point, the buying becomes manic and prices head skyward. Speculation is the order of the day, not investment and when such periods have erupted in the past prices have gone parabolic until such time as the last bears have been brought to heel and the public has thrown investment caution to the wind. We’re there now; this may become wild.

Whether Gartman"s bullish reversal was the catalyst for yesterday"s market weakness is debatable, however, one day later, with the modest selling persisting, here is Gartman again, and one day after Gartman closed his equity short, in anticipation of a "violent, manic" surge higher in the market, here he is again, explaining that he’ll "not hesitate even for a moment but to return to the short side of the equity market in US terms and perhaps even
broadly in global terms if the reversals in the DAX hold through Friday’s close." To wit:

Having covered our small short position in the US market we had had via a position in slightly-out-of-the-money puts, we’ll not hesitate even for a moment but to return to the short side of the equity market in US terms and perhaps even broadly in global terms if the reversals in the DAX hold through Friday’s close. This is the hardest thing any investor/trader/analyst must be able to do: to acknowledge having been wrong for a short while only to see the market vindicate the initial position and thus to be forced to return to the original trade at a less advantageous price. We face that possibility even as we write.

And so, with condolences to the bears, it appears that yesterday downward pair trade set up, is now over.

Bullion Banks Once Again Target Gold"s 200-Day Moving Average

Bullion Banks Once Again Target Gold"s 200-Day Moving Average

Written by Craig Hemke, Sprott Money News 

 

 

In the hope of inspiring Comex speculator liquidation, The Banks are once again targeting gold"s 200-day moving average.

 

Twice previously this year, The Banks have managed to maneuver the gold price down and through the 200-day moving average. On these prior occasions, the speculator selling that followed allowed The Banks to buy back and cover large amounts of their perennial short contracts.

 

On Friday, April 28 of this year, total Comex gold open interest was at 470,787 contracts and price was clinging to support at the 200-day. The next market day of Monday, May 1 saw Comex gold smashed for $15. By the time the selling subsided on Tuesday, May 9, price had fallen nearly $60 and total Comex gold open interest had contracted by over 37,000 contracts.

 

What had occurred? When price fell and closed below the 200-day on May 1, tremendous amounts of speculator long liquidation ensued. It was this selling that drove price down. Taking the other side of these trades were The Banks, which used the Spec selling to buy back and cover existing short positions.

 

Evidence of this is seen in the Commitment of Traders report from the survey week that ended on Tuesday, May 9. That report saw the Large Specs in gold decrease their NET long position by 40,200 contracts while the Commercials (Banks) decreased their NET short position by 39,500 contracts.

 

Price then rallied from $1225 on May 9 to $1305 on June 6 before beginning another pullback.

 

On Friday, June 23, total Comex gold open interest was at 449,164 contracts and price was once again clinging to support at the 200-day. The next market day of June 26 saw another one of those infamous "flash crashes" that led to a temporary breach of the 200-day but this line wasn"t completely breached on a closing basis until Friday, June 30. Price then fell nearly $40 in five days before bottoming at $1215 on Monday, July 10.

 

From June 23 through July 10, price fell over $50 and the 200-day moving average yet, this time, total interest actually rose by over 30,000 contracts. Again, what had occurred?

 

This selloff not only saw Spec long liquidation, it also saw a significant amount of new Spec shorting! Evidence of this is again found in the CoT reports of the combined two weeks of June 28 through July 11. Those reports showed the Large Specs in gold decrease their NET long position by 71,000 contracts while the Commercials decreased their NET short position by 76,000 contracts.

 

All of this is summarized on the chart below:

 

 

So now here we are again. Just as in April and June, price has fallen back and is finding support above the 200-day. Also just as in April and June, the Large Speculators have thus far remained steadfast with their NET position mostly unchanged over the last four CoT reports. With history as your guide, what level do you think The Banks will target next?

 

Of course it"s the 200-day moving average, currently found near $1266! There can be little doubt that The Banks hope to soon break this level again. In doing so, they hope to inspire enough Spec liquidation that open interest will fall back under 500,000 contracts from the current 529,000. This 30,000+ long contract liquidation by The Specs would allow The Banks to cover 30,000+ shorts...all of this before the next rally sets in.

 

And how far might price fall if The Banks can pull this off? Well, just as in May and July, not too far really. Note that those two prior riggings only moved price about $35-$45 below the 200-day before it turned and rallied. A similar drop now would target the $1230 area but I don"t think it would make it quite that far. The chart below shows considerable, long-term support in the area near $1240, instead.

 

 

None of this changes, of course, our 2017 forecast made back in January. Back then, we speculated that price would advance through 2017 in a three-steps-forward, two-steps-back sort of pattern with the year"s highest prices coming in the fourth quarter. Let"s just wait now to see if The Banks are able to cover more of their short position before this final leg of the 2017 rally begins.

 

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

 

 

Bullion Banks Once Again Target Gold"s 200-Day Moving Average

Written by Craig Hemke, Sprott Money News 

 

Under The Thumb Of The Banks

Editor"s Note:  

While we are disappointed to hear of Marc Faber"s recent comments and the fallout from them, Sprott Money is not affiliated with Sprott Inc. and have had no bearing in Mr. Faber"s resignation from the board. We are a private company held by Eric Sprott. Thanks. 

Written by Craig Hemke, Sprott Money News

The price of Comex Digital Gold continues to be held hostage by the major Bullion Banks which operate on the Comex in New York. Though some "improvement" in their collective position was noted in the latest bank Participation Report, it is very important to note that The Banks are still as heavily net short as they were at the price peak in the summer of 2016.

 

We wrote about this recent surge in Bank shorting last month and the article can be found here: https://www.tfmetalsreport.com/blog/8554/guard-aga...

 

In the article, we wrote that the 24 Bank short position in Comex gold had nearly doubled in just two months from 104,788 contracts net short to 213,746 contracts net short. The significance and speed of this rise rivaled what was observed in the first half of 2016 and we all know what followed in the second half of 2016. Namely, a smash in price that flushed the Spec longs back out of the Comex paper gold market and allowed these Banks to buy back and cover many of their short positions.

 

Specifically, the 24 Bank position, as divulged through the CFTC-generated Bank Participation Report, rose from just 45,259 contracts net short on 1/5/16 to a high of 195,262 contracts net short on 5/3/16. After falling back in June of 2016, this position again hit 191,834 contracts net short on 7/5/16.

 

From there, as price fell from $1375 to $1175, the 24 Bank position contracted back to just 73,722 contracts net short on 1/3/17.

 

As price rose again in 2017, The Banks resumed their profitable game of initiating Comex contracts on the sell side and taking the opposite position of hedge and trading fund speculators on the buy side. As price rose once more from $1175 to the early September peak near $1360, the 24 Bank position rose again to the aforementioned 213,746 net short.

 

Our concern in September was that all of this Bank shorting would soon lead to another fall in price and, unfortunately, we were proven correct as price fell to $1275 by the time the latest survey was taken on October 3. However, even though price fell by nearly $75 between report surveys, the latest Bank Participation Report showed that the total Bank position had only declined by about 30,000 with a new net short position of 182,197 contracts.

 

Therefore, there are several important items to note at this point:

 

1. As of October 3, the 24 Bank net position was nearly as heavily net short was it was at the price peak in July of 2016.

 

2. While doubling the size of their net short position on the $150 price rally of July and August, The Banks were only able to trim their position by 15% on the $75 pullback in September.

 

3. The Speculators have obviously held firm despite the recent pullback in price. They have not been quick to turn tail and run from Comex gold, choosing instead to remain steadfastly long.

So now the battle begins for the fourth quarter. Will price rise as emboldened Specs demand even greater long positions from the market-making Banks, forcing The Banks to retreat? Or will The Banks once again seize control of price and send it plunging down through the 100-day and 200-day moving averages, which in turn would finally lead to the Spec liquidation The Banks seek?

 

Since January, we have forecasted at TF Metals Report to expect the highest prices for calendar year 2017 to be seen during this fourth quarter. The only "fly in the ointment" of this forecast is this current historically large, Bank position. Can price move higher again even though The Banks are already net short 182,917 contracts for about 570 metric tonnes of paper gold?

 

We"re likely not going to have to wait long to find out.

 

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

 

Written by Craig Hemke, Sprott Money News

 

 

This Is The Worst Year For US Construction Spending Since 2010

Those construction numbers don"t account for the massive spending on home renovations. Home Depot is killing it:

"Home Depot reported earnings of $2.25 a share, compared with a forecast profit of $2.22 per share.

Revenue was $28.11 billion versus an estimate of $27.84 billion.

Same-store sales climbed 6.3 percent, better than the expected 4.9 percent growth."

Folks aren"t selling their houses and buying new ones. They are renovating their homes and staying in place. HGTV could be hurting new home builders like Amazon is hurting stick and brick shopping malls. There is a new kind of economy, and some of the biggest players of the old economy will either have to reinvent themselves, or they will be cut out altogether. And, by the way, after two major hurricanes and lumber prices up over 40% in two year, building new houses will just become too expensive for most folks to afford.

You know what they say about divorce, "sometimes it"s just cheaper to keep her". Well, the same could be said about divorcing our old houses.

God is Dead

From the Slope of Hope blog:

That"s something I"ve got in common with Private Pyle: he wants to be different. For whatever reason, I"m a contrarian to the core. Indeed, one of the appeals of messing around with personal computers back in 1980 was that practically nobody else was doing it (in case you hadn"t noticed, the unusualness of microcomputers vanishes decades ago, so that aspect of the appeal is likewise gone).

This contrarian view of the world extends to the "cover curse", a theory to which I strongly subscribe. Any bold declaration made by a prominent publication seems to invariably mark an inflection point. There"s this cover, for instance, which came out immediately before the demise and near-bankruptcy of Apple:

This cover from The Economist (itself quite famous for its covers being so often dead wrong) when oil was $10 per barrel and was about to explode hundreds of percent higher.

This homoerotic image of the strength of the US dollar, just before it commenced its very steady slide promptly at the start of 2017:

Barron"s decided Facebook was a lousy stock, just before it started a gargantuan run up to "blue chip" stock status, almost exactly to the day......

And, perhaps the most famous of all, Business Week decided just before 1980 began that stocks were doomed, after which time literally trillions of dollars of new wealth were created.

So, time and again, newspapers and magazines get it wrong - - but plenty of other media does too. This book, for instance, was all about the coast-to-coast millionaires in the United States, and it came out June 2007, precisely at the apex of the housing bubble.

So with mountains of other anecdotal evidence, it would seem that only a fool would declare loudly, on a public stage, anything definitive, since major announcements from prominent publications or thought leaders so often represent the collective consciousness at the point that it"s utterly saturated with some particular notion. Even though they say that no one rings a bell at the top, if you look historically at major turning points, there were always bells ringing - - just in a contrarian, hidden form.

Thus, when Trump was elected, inaugurated, and soon thereafter started bragging about the stock market, it seemed like a major reversal signal. After all, this is the President of the United States, and he"s crowing to the world about a stock market for which he gives himself full credit. So that"s bound to be some kind of peak, right? Surely after a tweet like that, the gods above will shame the man, just like they"ve embarrassed anyone showing hubris since the times of the ancient Greeks. Right?

.......Right?........

And yet there they are. Tweet after tweet, month after month, about high after high. And yet the market just keeps going higher..........which, let"s face it, is just going to egg the man on even more. It"s one thing for an old biddy like Yellen to yammer on about no more crises in her lifetime. But the POTUS is another matter altogether.

It really wasn"t that long ago that acts of hubris, either in the form of cover stories or political braggadocio, were met with swift reprisal from the universe. The biggest question facing us today - - far greater than where interest rates are going, or what the dollar is going to do, or even whether Kim is ever going to launch any of those missiles he"s so proud of - - is whether market forces...........normal market forces..............are gone for good. They might just be, and if so, hubris is not only back in style, but it"s going to be here to stay for a long, long time.

"We've Never Seen Anything Like This": Repo Market Snaps As 10Y Suffers "Epic Fail"

It"s been a while since we saw any major dislocations in the Treasury repo market, i.e., collateral shortages as a result of surging TSY shorts, for the simple reason that after the first quarter when everyone was certain that Trump reflation trade would kick in but didn"t, the record number of built up spec net shorts got trampled by the rising price, rapidly shifting over to record longs.

However, the peace and quiet quiet in the repo market was shattered this week, when almost overnight the 10Y went from "normal" in repo, at a rate of 0.50% on Friday, to a special -2.00% on Monday, and then a Super Special, if not record, "fails rate" of -3.50% this morning.

Commenting on this dramatic move in 10Y repo rates, Stone McCarthy"s Alan Chernoff, in a note titled "Epic Fail", writes that "the 10-year note has been below the fails rate and shows no signs of moving! It opened at -350 basis points, and though pressure has eased off of it slightly, it is STILL below the fails rate at -300 basis points."

As a reminder, the fails rate is the 300 basis points below the lower end of the target fed funds rate, putting it at -200 basis points currently. And, if an issue falls below the fails rate, it becomes cheaper to just pay the fails charge of 200 basis points rather than deliver than issue, which is what is happening. In dollar terms, the agency repo fails nominal was at $131BN on  Sept. 6 vs $153.6 BN on Sept. 5, above the 5-DMA $90.7b, according to DTCC data.

To be sure, some firms that want to maintain good client relationships will likely want to deliver the trade at such a low rate, although it appears that not many are rushing to do so.

As Bloomberg writes, confirming what we have said repeatedly in the past 3 years when we commented on these sudden repo market dislocations, the "specialness is due to lack of supply as shorts roll from triple-issued old 10Y into single issue current 10Y."

No matter the reason, Chernoff observes that he has never seen a move quite like this and that "this is one of the lowest rates that we"ve ever seen the 10-year note repo trade at, and definitely the furthest below the fails rate."

One final observations: while even term 10-year repos are below the fails charge at -215 basis points, the 3-year note is only modestly tight at 65 basis points, while and most other issues are trading near GC.

Some final parting words: keep a close eye on the 10Y - a positioning move of this magnitude does not take place in a vacuum, and either "someone knows something" or another busload of specs is about to be crushed once more.

Restoration Hardware Shorts Annihilated After Company Announces 50% Of Stock Repurchased

Restoration Hardware shorts had it too good for too long.

After reporting abysmal numbers in Q3 2016, Q1 2016, Q4 2015 - when the company went so far to blame its own crashing stock price for poor earnings - RH stock more than doubled after its better than expected Q4 2016 numbers as long-suffering investors (not to mentioned squeezed shorts) assumed that that was finally it: that the company has finally turned the corner. It all came crashing again last quarter, when as we reported "Restoration Hardware Imploded After Terrible Guidance, Bizarre Disclosures."

Sadly for the shorts, who doubled down on their efforts to slam the stock, it all ended last night with a bank, not a whimper, when the company reported better than expected Q3 ESP and revenue and lifted its sales and profit forecasts for the year. On the subsequent analyst call, CEO Gary Friedman said he expects that RH, which has faced concerns about its high debt level, would generate about $400 million in free cash flow in 2017, once again reverting to the company"s infamous optimistic posture. That “should address any concerns about our balance sheet and debt ratios,” he said.

More importantly, the company also unveiled a full blown war with shorts, when in its press release it announced that since the beginning of the year, the company had repurchased an unprecedented 49.5% of its shares outstanding, spending a record $1 billlion on buybacks in the 6 months ended July 2017. To wit:

We have reinvested the $282 million of free cash flow generated in the first half, and the $263 million of cash and investments on our balance sheet at the beginning of the year towards the repurchase of our stock, which we believe is an excellent allocation of capital for the long-term benefit of our shareholders. We have repurchased 20.2 million shares to date in 2017, or 49.5% of the shares outstanding at the beginning of the year. Outside of the convertible notes that are due in June 2019 and June 2020, we had aggregate debt of approximately $504 million at the end of the second quarter, including a $100 million second lien bridge loan that we expect to repay in full by year end.

And here is what may be the most amazing cash flow statement we have ever seen: the company borrowed $460 million in 2017, and used virtually all of its available cash and working capital to repurchase stock.

The company also said that "we believe that our shares remain undervalued, and we will continue to evaluate further share repurchases based upon market conditions and our capital allocation priorities"even if it means conducting half a management buyout of the company just to punish the shorts.

That is all the panicked shorts needed to hear, and as of this morning, a historic short covering squeeze has ensued, with RH stock exploding higher by over 40%, on pace for its best day since the company went public nearly five years ago.

And speaking of short pain, there is plenty of it to go around: there was roughly $528 million in RH short interest at last check, and following today"s mauling, shorts are poised to take $231 million in paper losses if the share price closes at these levels, according to S3 Partners, quoted by the WSJ. That’s likely to encourage some shorts to get out of the trade, according to Ihor Dusaniwsky, head of research at the financial analytics firm.

Until today, RH was the second most heavily shorted stock among home furnishings brands, behind only Williams-Sonoma, although perhaps sensing the turn, the value of the short interest had declined rapidly since July, when short interest was at roughly $1 billion.

That"s eased up the cost of borrowing, which had been as high as 71% of the share price on an annualized basis but has since dropped to about 12%, according to S3 Partners. Still, that fee for most stocks is below 1%.

While the chart below shows now-dated information, management"s plan was clear: buyback as much stock as possible, and crush as many shorts as possible before reporting modestly good numbers and a sterling outlook. For now, it appears to have achieved its mission.

Still, the war between longs and shorts is far from over: between the end of last year and July 19, when the stock hit its highest closing level of 2017, shares climbed more than 150% as the company executed a share repurchase program. That was right around the time that short interest peaked, and the stock subsequently dropped 36% through Wednesday.

Naturally, chasing price, the WSJ reports that some analysts said they’re finding a lot to like in the stock after the earnings report. Bradley Thomas and Sameet Desai, analysts at KeyBanc Capital Markets, said in a note to clients that, “while our July downgrade to Sector Weight was predicated on valuation and leverage, we find ourselves increasingly positive on RH.”

And so, here come the sellside upgrades, dutifully following the surge in the price, just in time for the company to massively disappoint again in three months when it once again misses its wildly optimistic forecast, sending the stock crashing yet again and resetting this rather entertaining (if not for the shorts today) cycle.

Meanwhile, one question that has emerged: with RH repurchasing half of its outstanding stock, will there be naked shorts who are physically unable to cover their bearish bets, in the process prompting speculation of yet another Volkswagen-type event, as a scramble begins to cover at any price?

S&P Ramps Above Key Technical Level, Nasdaq Panic-Buying Continues

The machines have achieved their short-term goal (getting the S&P above its 50-day moving-average)...

Next is getting S&P green for the month.

Once again, the US market open triggered a panic-buying bid under mega-cap US Tech stocks...

With FANG stocks up around 3.5% off yesterday"s lows...

Dismal Chinese Trade Data Sparks Panic-Buying In US Stocks

Because nothing says "panic-buy" stocks like the worst Chinese trade data of the year.

Something "odd" ocurred at 0943ET. Stocks were lower and VIX higher, when suddenly...

Nasdaq was panic-bid...

VIX was monkey-hammered...

And "Most Shorted" Stocks were squeezed higher...

Of course, this week does line up for a melt-up...

Bears Throw In The Towel: FANG Shorts Hit All Time Low

At the end of May, when Bank of America looked at some of the most widely held stocks by active managers, it found that FANG stocks (FB, AMZN, NFLX, GOOG/GOOGL) have returned nearly 30% YTD vs. 8% for the S&P 500. More importantly, it found that managers were 32% overweight Information Technology + Internet & Catalog Retail (a Discretionary industry), which was driven by a remarkable 71% overweight in FANG stocks.

This week, BofA"s Savita Subramanian updated the study of most widely held active manager stocks, and found that while fund managers holdings of FANG and FAAANG (which also includes ACVO and ADBE), have modestly declined over the past two months, they still remains remarkably stretched, or as she puts it "active managers" disproportionate overweight in FAAANG relative to the Tech sector and Internet and Catalog Retail is even more dramatic than the FANG stocks."

But more interesting is BofA finding - both then and now - that since long-only funds did not appears to be bidding up FANG (or FAANG) stocks, which had remained relatively constant among their total portfolio hodings...

... the answer was that "the recent move in FANG may be driven more by short-covering than by active buying."

However, as Bank of America also notes, that short covering, if indeed that is the cause of the levitation, is ending as the short interest for both FANG stocks is now down to all time lows.

A separate analysis released today by Bloomberg"s Stephen Gandel confirms as much, and notes that despite the seemingly pervasive negative sentiment against FANGs, everywhere from Goldman to Howard Marks...

Goldman Sachs Group Inc. strategists predicted an "air pocket" was coming in the FANG bubble. After a survey of investors, Bank of America strategists called FANG and other technology stocks the most crowded trade in the market. Oaktree Capital co-founder Howard Marks recently compared the FANG to the Nifty Fifty and dot-com stocks of the 1970s and 1990s, respectively, as well as other bubbles.

... the short interest for the four companies has sunk to a new record low: "collectively, the short bets against FANG stocks accounted for just 2 percent of their traded shares. Exclude Netflix, and the average short interest for the group drops to just 1 percent. That compares with an average of 4 percent for the S&P 500."

Some have pointed to the recent surge in Netflix and AAPL"s blow off to new all time highs on Tuesday after earnings as confirmation that the shorts are right to stay away, others have said that the move in the company - whose growth rate is a mere shadow of what it used to be, and which has now posted declining Chinese sales for 6 quarters - was so acute precisely due to another batch of shorts throwing in the towel and covering, or as BBG puts it, "tech bears shedding their fur has pushed the stocks higher."

And while the lack of shorts may suggest smooth sailing for the group over the near immediate future, over the long term, a lack of skeptics could be bad. Gendel points out why:

The dearth of short interest suggests an enthusiasm for the shares that could be quickly popped if things turn south. And the falling short interest is odd given that the FANG stocks have risen an average of 37 percent this year, potentially setting them up for a fall, or at least a slip. Amazon, after all, trades at nearly 93 times its expected earnings for this year. Netflix"s unending cash bonfire has burned through $2.1 billion in free cash flow in the past 12 months. The expectations for sales of Apple"s coming iPhone are stratospheric even though the price of one model may top $1,000. Any of these situations would seemingly make for a good short bet, if anyone was willing to make it.

For now, almost nobody is, as most traders remain "paralyzed" (or perhaps complacent) and instead chose the comfort of the passive-investing, ETF, CTA herd which continues to grind stocks ever higher with less volatility than the bond market. Then again, with all the FANG bears having thrown the towel, this may be just the right time to go short... again. Judging by the recent price performance of the group, others may have gotten the same idea.