PM Daily Market Commentary - 8/21/2013

davefairtex
By davefairtex on Thu, Aug 22, 2013 - 12:36am

Gold finished the day down -4.10 on average volume to 1366.40, with silver down -0.15 to 22.85 on moderately heavy volume  The gold/silver ratio rose to 59.79.  The minutes of the Fed meeting were released today at 1400 EST.  As usual this caused gold to swing violently - first down, then up, then down again on high volume to close out the day lower.

The dollar was up +0.48% on the day - it was the only thing that closed the day higher after the minutes release.  Perhaps in response, everything else sold off.

Copper was off -0.5%, oil -1.6%, SPX -0.58%, and the 20 year treasury -1.09% making a new cycle low.

Mining shares sold off hard on heavy volume, with GDX off -4.62% and GDXJ down -2.93%.  Miners started the day opening down, traded sideways for most of the day, and after the Fed minutes were released, sold off into the close, ending the day at the dead lows.  The heavy volume and the unpleasant close say "distribution" to me, with the big money dumping the miners in response to the information (or lack thereof) coming from the Fed minutes.  Of course, some names did better than others; a number of miners did not close below yesterday's lows (AUY, ABX, SLW, MUX, PVG), while others sold off quite hard (KGC, AUQ, GG, NGD).  Not all miners are created equal in the eyes of the market.

Perhaps the miner selloff was also a reaction to the lack of confirmation from silver's big rebound yesterday.  If you recall I said that such a bounce required confirmation on the following day - without such confirmation, the move yesterday in silver is really more of an example that the shorts have reappeared and the dip-buyers were not numerous enough to keep the rally going.

With events such as the Fed minutes release, we care a bit less about the actual news (we leave the  parsing of commas and the like to the Financial Entertainment TV talking heads), and instead we focus more on the market's reaction to it.  It appears that the market was not so happy.  Pretty much everything closed the day lower after the release.  And with the reappearance of the shorts yesterday in silver, this does not bode so well.  It is quite possible we have entered a correction phase.  Short and medium trends are still up, but it is quite possible PM will retrace for a time, with miners reacting more violently to the correction than the metal itself.

Based on volume and price movement in the miners, it is likely the selloff in the miners will continue for a time.  If we assume the bullish trend overall in PM remains intact (trends in motion tend to remain in motion) we will have a good opportunity to "buy the dip" in the miners once the selling is exhausted.  When will this be?   I have no idea.  We have to let the market tell us when the move down is likely over.

 

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