PM Daily Market Commentary - 8/13/2013

davefairtex
By davefairtex on Wed, Aug 14, 2013 - 1:12am

Gold finished the day down $15.50 on average volume to 1336.40, with silver up $0.06 to 21.43 on heavy volume.  The gold/silver ratio dropped yet again to 61.62.  Silver tested overhead resistance, with the day high at 21.75, while gold basically sold off.

Silver had an interesting daily candlestick called a doji; interesting at least in the context of its four day move up preceeding the doji.  Here's a site that explains what a doji is and what it means.  Candlestick reading isn't a perfect predictor of the future, but when accompanied by high volume as it was today, it adds emphasis and makes me pay attention.  It suggests we might have a trend reversal; if silver sells off significantly tomorrow, that would be a confirmation which would not be good.  Likely that would encourage the shorts and cause the recent mining longs to bail out.  Take it all with a grain of salt, but sometimes it does play out like this.

http://candlesticker.com/Pattern.aspx?lang=en&Pattern=0700

The dollar was up again today, this time by +0.44% and its move up seemed to take its toll on PM.  My best guess is that the buck won't rise much further, which should give PM more room to move up, but that's just a guess, based mostly on the current trend which (short & medium term) is still down.

Miners sold off a bit, which is expected after a selloff in gold and especially after a big run up in price.  GDX was down -2.93%, and closed below yesterday's gap-up open, which highlights the risk of chasing prices and succumbing to the "fear of missing out."  Even with the move down, GDX 20 day MA closed above its 50 day MA for the first time since November 2012.  That 20 over 50 has been a pretty good indicator in this cycle.  Selling the GDX at the first crossing would have you out at 51.50, and buying in at this crossing gets you in at 26.04.  How's that for selling high and buying low?  Of course until the full cycle is complete we can't know if this buy signal will work out.  But the sell signal certainly did, at least for GDX.

Mining juniors held up surprisingly well, only down -0.18%, which bodes well for a continued move up.  Juniors also had a 20 EMA crossover today.  Downside crossover happened Nov 6 2012 at 95; today's upside crossover was at 45.

Moving averages work well in trending markets - in side-tracking and trend-less markets, they aren't as helpful, and you can get false signals that whip-saws you in and out and ends up costing you money.  No indicator is perfect.  If it was, this would be called "collecting money" and not "trading."  I'd say moving averages tend to work better at the end of long trending periods, but again, nothing is perfect.  We all want that perfect indicator that tells us unambiguously to "jump in now" but - usually the best we can hope for is a whole collection of evidence that, taken together, suggests the odds may be on our side.

 

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