PM Daily Market Commentary - 9/12/2013

By davefairtex on Thu, Sep 12, 2013 - 4:39pm

Wow.  Gold dropped $43.10 on heavy volume to 1320.70, with silver down $1.41 to 21.76 on moderate volume.  The gold/silver ratio rose to 60.66.  Both silver and gold were sold all day long, starting in the AM in asia and only stopping because of the NY close, at the dead lows for the day.  Silver was hammered much, much harder than gold, although the volume was surprisingly light given all the selling.  As for the price action, it was just down all day, with each rally being sold.  There is not one bit of good news I can report for PM.

Gold is starting to give me some cause for concern: it closed below its 50 day MA.  That's not the end of the world, but it certainly hurts the bullish case.  And the 20 day EMA has distinctly started to turn down.  One hopes gold will find support at 1300, but if this is all about "tapering" we still have 4 more days before our Lords and Masters let us know how things will be.  Certainly, not enough buyers showed up today to stem the flood of selling.

Silver too is a bit worrisome.  I thought 22 support would have done something, but it just didn't matter.

Sometimes when those descending triangles fail, the result can be pretty dramatic.

The dollar was basically flat, off -0.02 [-0.03%] to 81.69.  It did not appear to affect trading at all today.

About that "reversal day" for the miners from yesterday - not confirmed.  GDX was off -5.6% on extremely heavy volume.  GDXJ was off -7.10% on heavy volume.  For the first hour after the open it looked like miners had some buyers stepping up with good volume, but after that hour passed, mining shares were sold for the rest of the day, closing at the dead lows just like PM.

So both miners and PM - a big move down on heavy volume, closing at the dead lows.  No reason to buy here that I can see.  Wait for someone else to play the hero, and then wait for the following day for confirmation from yet another hero.  Low prices can always go lower!

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petercastle's picture
Status: Member (Offline)
Joined: Sep 12 2013
Posts: 2
no fun playing against JPM!!!

Hi Dave!! What an incredible day!! It is amazing how I am reading from different sources already as to "the reason why" gold and silver were taken to the cleaners as bad as they were. Trying to find a "reason" is an absolute waste of time and energy, and will only enfuriate gold and silver investors even more. It is what it is!! We are sitting at the same table as the biggest, baddest, most powerful and downright crooked establishment in the JP Morgan. They don't need a reason to slam price. They do it because they can, and they make massive amounts of money doing it!!! Technically, gold and silver look atrocious in the daily charts, however, I focus 90% of my time in the weekly charts, to try and rid myself of all the day to day crap. As ugly as this week has been, I am still hoping for some sense to come back tomorrow (not holding my breath!) And at least holdthe weekly trend line from the june low. A close below there tomorrow and I'm out. But the one thing that has me thinking there is something else under the hood here is the fact that gold and silver ratios are trendung positive against the s&p. The rally a couple weeks back overshot the 10 and 20 week ma's, and it looks to now be testing the 10 week. Macd is positive on both those ratios and trending higher. If we can bounce tomorrow to stem the bloodbath, and hold those ma's, next week could be EXTREMELY interesting!! If Bernank comes out and says something that spooks the market, we could see the s&phead south in a hurry!! Especially since by now everyone is expecting the Fed to have the markets back. Next week will be interesting, to say the least!!!!!

davefairtex's picture
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5739
exploring the timing of the evil banker raids

So I read elsewhere on the net about how the evil bankers are up to their old tricks again.  In one sense, that's true - quite clearly one or more big players decided to dump a bunch of contracts on the market, repeatedly, until the price was hammered down $40.  And yet I have to ask, could we have seen this coming, or was this a "bolt from the blue" attack?  What were the conditions we saw right up to yesterday?

Let's review.  Gold topped August 27 at 1434.  After that, it sold off for 9 trading days right down to its support level of 1350-1360.  Each rally was lower than the last one, making a clear bearish pattern moving the price steadily lower, with support at 1360.  Buying was especially tepid the last two days.  Gold was at a discount, but apparently, nobody cared.

Read what Trader Dan had to say yesterday, prior to the smash:

...recent gains in gold have come mainly from hedge fund short covering as their short positions had become rather large from an historical perspective. Now that they have covered a large number of those shorts ( bought them back) there is simply no additional source of buying on a large enough scale to take the market through important overhead chart resistance levels. Large speculators do not have any technical reasons to chase the price of the metal higher and thus they are NOT ENTERING this market in large numbers.

In two words: "no buyers."

It was at that point that the evil bankers showed up and assaulted gold.  This is the same chart formation where the April gold crash occurred.  You can see the details on the 1-hour intraday chart below:

To my mind, the problem really was in the 9 days preceeding the big smash yesterday - not enough buyers were showing up, and most especially in the last few days.  That's why each rally was lower than the last rally: not enough buyers.  Why no buyers?  Well maybe this was about Syria, or maybe fears about tapering, who knows.  All I can say is, not enough buyers inevitably leads to a downtrend, which ended up in yesterday's Big Gold Smash (i.e. a big move down after a break of support).

Shorts were extremely tentative at the start of this move.  They were vicious and bold today.  Did "the bankers" just wake up yesterday and say to themselves, "hey guys, wouldn't it be fun to pound the gold market?"  That's not what the evidence says to me.  Gold went into a downtrend, was at a support level, they saw the buyers had more or less disappeared, and it was at that point they jumped all over it.

There's a saying in the markets that things ride the escalator on the way up, but jump down the elevator shaft on the way down.  Basically: things go down a whole lot faster than they go up.  This is true in every market, not just gold.  That's because once support breaks, buyers vanish and prices gap down, and shorts are emboldened and they start selling every rally until price gets cheap enough for buyers to show up again.

Of course this sort of behavior is abetted by a lack of position size control in the futures markets which allows one or two players to control the tempo (to their own profit) at such vulnerable times, but there is a reason why the big guys pick a particular time to stage their assault, and I believe that if we watch closely, we can at least see the potential for it coming.  That's my operating model anyway.

As to how much lower it will go, we will have to see when the buyers show up again.  Hopefully gold 1300 provides some support.  PM in asia trading right now is showing some modest promise, but ultimately we can only wait and see.  A pattern of higher highs intraday is what we're looking for.  Gold above 1331 would be a good start.

One note of caution: if gold drops below 1275, the uptrend we've been enjoying will be broken.  At that point, the shorts will become even more emboldened and - regardless of premiums, GLD, COMEX registered gold, GOFO rates, or whatever, PM will most likely drop further.

One positive note: shanghai gold premiums are back up to $9.38 as of yesterday.

davefairtex's picture
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5739
me too


I sure don't want to play against JPM either.  Godzilla vs. the mouse.  The best us small mammals can do is avoid getting squashed and do our best to watch where Godzilla happens to be walking.

I also agree a search for "why" is ultimately futile.  Tapering?  Syria?  Phase of the moon?  Its a tangled picture.  Something led the buyers to vanish and in some sense, we don't really need to know why.  We just need to watch for them to reappear and at that point, we can make our decision to re-enter.

I think JPM (or any of the other players) play their tricks when the odds tilt in their favor, and not until.  That's why they didn't try this gold smash until they saw buyers had gone on strike.  That's my theory anyway.

Hmm, that gives me an idea.  When I see the buyers go on strike, perhaps I too should take action?  Follow Godzilla instead of trying to fight him.

Its a thought anyway.

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