Hi Reg,

If the hedge funds took their long positions on the majors some time ago they may still be able to lock in some impressive gains in spite of this week's excessive correction.

My understanding of the ratio spread between juniors and majors is limited, however I remember Jim Sinclair stating that the positions are derived from mathematicians (geeks as he labeled them) using very complex algorithms that work on momentum and will begin to automatically adjust their position accordingly.

So the technical damage from this week's take down of the majors would be fed back into these "black boxes" which may subsequently reduce the intensity of their long position.

Conversely, the juniors seem to be holding rather well in comparison and this would feed back into the short side of the "black boxes". From what I understand the short position is massive and cannot be practically unwound so when they do begin to move the resultant short covering will exacerbate that move.

I would expect that many funds and institutions who have been watching from the sidelines are also keenly aware of this and have observed the junior's lack of reaction from this latest take down and may view this as a relatively safe entry point given how little impact this recent commodity correction has had on the juniors.

When gold spiked in 1980 many of the PM shares failed to match that move and they didn't really move until gold corrected and began another move up well short of the 1980 peak. We might see something similar happen when the commodities pick up again.