PM Daily Market Commentary - 8/14/2013

davefairtex
By davefairtex on Thu, Aug 15, 2013 - 1:02am

Gold finished the day up 14.60 on light volume to 1335.50, with silver up 0.40 to 21.83 on above average volume.  The gold/silver ratio dropped to 61.18, another good day for the ratio.  Silver is moving to striking distance of 22 resistance, and it closed at its high for the day, a bullish sign.  Gold's price action today was definitely more bullish than in the previous few days, since it too closed at its high, although the light volume is a bit worrisome.  That doji candlestick made by silver yesterday - not confirmed.

The dollar was down slightly today, off -0.04% - perhaps this helped silver and gold to continue moving up.   It is quite possible 82 marks the top of the modest USD rally off 81 and now the dollar will continue its short & medium term downtrend, which would actively help PM on its current uptrend move, possibly aiding silver's move through 22.

Early in the day many miners broke out to new highs, with clear evidence of short covering; some could not hold onto those gains, but they still performed well on the day.  GDX was up 5.6%, silver miner ETF SIL was up +3.8%, GDXJ +4.6%, all on excellent volume.  Continued good volume is a sign that buying interest in the miners remains strong.  If volume were to start declining, that would be a sign that the move was starting to taper off.  The senior miners were the star today.

The signs we look for in rallies are - heavy volume on up-days, with substantially lighter volume on the down days.  No market moves straight up (although the last 6 days in silver have been close), but as long as the down day volumes are light, the upward story remains intact.  High volume down days indicate that big money is liquidating rather than accumulating, and it is always important to notice when this happens because that's a warning of a possible impending trend change.  So far - no sign of that.

In early trading in asia, silver broke through 22, then retreated; it is currently trading at 21.97.  I continue to be amazed by the strength in the silver rally.  Something has lit a fire under the silver futures markets, I don't know what it is (I can guarantee it isn't Americans buying silver eagles - they constitute 4% of global silver demand) but it is amazing to watch.  Perhaps silver is following copper, which is staging a similar sort of rally based on good news from China.  I keep expecting a correction - even a brief one - but as long as volume remains intact, the prognosis is for a continued move up.  If this continues eventually gold will be dragged, low volume or not, right through 1350 resistance on silver's coattails.

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11 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
PM: now that's what i call a breakout

Silver just broke out in NY trading, high of 22.54, dragging gold along with it - gold hit 1363.  Lots of shorts running for cover in both silver and gold.  7 straight days up for silver.  There may still be more to come today, and we will see how it closes.  If silver closes at/near the high...bad news for the shorts.

Hrunner, I guess that answers your question, albeit ex post facto.  :-)

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
OMG.... Oh My Gold...

Would you believe I was riding a fairly large position in NUGT through that surge... came back from lunch and found I was having my best day in a while. Got out of the leverage and converted back into some of my favorites;  SA, IAG, MUX.  Action in the miners is very non-uniform.. some are waning (PPP, - 0.8% ) while others like IAG are flying (up 7.9 % at this writing).  In the Silver space EXK has been the most explosive of late of those shares I watch.  

I got into the NUGT position later in the morning, with a tight stop, when I saw that Gold was brushing off the Algo-driven (taper positive) jobs data hit and was toying with the idea of going positive.. it seemed to me that if it did break green, we might be off to the races again.  

There is nobody left to sell Gold.  This thing has the potential to build on itself, fully supported by the fundamentals.  All that is left for TPTB are desperate moves like this;

      http://www.zerohedge.com/node/477636

Not satisfied with raising import tariffs on gold and putting in place jarring new FX flow capital controls, it seems the war on a weakening Rupee continues. We previously discussed the unintended consequence of such actions - including the rise of the gold smuggler - but the latest total ban on the importation of gold coins and medallions is edging India closer and closer to the Argentinian edge of Cristina Fernandez totalitarianism (after the initial ban on sales in June)

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2934
Silver just broke above its 100 DMA

From Zero Hedge

kevinoman0221's picture
kevinoman0221
Status: Silver Member (Offline)
Joined: Sep 25 2008
Posts: 144
Wow

I just bought a little silver a few days ago. Lucky timing! I hope the gains hold...

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1756
Goldbug party at my house tonight

I've got the beer.

smiley

eexpo's picture
eexpo
Status: Bronze Member (Offline)
Joined: Jun 30 2011
Posts: 51
party tonight

I'll bring the band.

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Wrong, but Buying

Dave,

Yes, I was wrong.  But you are teaching me to be not so stubbornly adherent to my guess that it prevented me from listening to the market and from buying metal today.

There is always a possibility the big players will drive price down one more time, but given the current CoT structure, I was afraid we may never see 21 and 1300 again.  So I bought more.

H

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
not wrong!

Hrunner, you weren't wrong - you had two scenarios, and the market picked the first one.  I absolutely was not twitting you about it, I was kind of laughing at myself for not responding to your question because I could see it going either way, and so I figured I'd let the market reply, and it did.

So you are buying the breakout.  Lots of people buy breakouts during rallies, its a fine strategy, just put a stop somewhere below that buy-in point so if it was a head-fake, you can live to fight another day.

If you look yesterday at the intraday moves, buying the breakout at 22.16 would have been an awesome strategy.  It doesn't always work that way, which is why you have stops.

Of course if you are buying actual bars - two years ago, buying silver at these levels would been a gift!

In this current move up, we will eventually rest, the market will fall back on profit-taking, as it always does.  The only question is when, and how far back it will drop.

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Good Counsel

Thanks Dave, good analysis and good counsel about the stops.

FWIW I am also considering put options as insurance to prevent catastrophic losses. 

Isn't that what hedge funds do for a living?

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Congrats Kevin

Congratulations, Kevin.

Now think through when you are calm and not watching price under what conditions you would sell.

Many, including myself, consider PM to be an insurance policy against currency destruction by govt and central banks. 

Consider what is your panic level on the downside of price.  The beauty of owning physical silver in your possession is that it is always the same value in grams of silver.  You don't ever have to sell it.  Even if the paper price is driven to 18, 15, or 0, it matters not to you or me. 

I will not sell until I see fundamental reform of the current financial system and markets.  Or a triggering event that forces a reset on the system, in which case my silver will preserve wealth while the administrators work their magic (sarc off).

Now if silver goes to 200, and housing prices fall, such that I could rotate out of silver into great deals on real estate, now that would get my attention....

H

kevinoman0221's picture
kevinoman0221
Status: Silver Member (Offline)
Joined: Sep 25 2008
Posts: 144
Oh, we are on the same page

Oh, we are on the same page Hrunner. 

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