PM Daily Market Commentary - 9/19/2013

davefairtex
By davefairtex on Fri, Sep 20, 2013 - 12:47am

Gold remained even, down -0.10 on moderately heavy volume to 1364.90, with silver up $0.14 to 23.09, also on moderately heavy volume.  The gold/silver ratio dropped again, to 59.11.  After yesterday's huge move, gold mostly sidetracked today, briefly making new highs to 1375 but closing flat.  Often after a big move up selling will occur the following day, so I interpret today's doji candlestick as relatively bullish.  Silver behaved similarly, with a slight upward bias.

The dollar rallied modestly, +0.27 [+0.34%] moving up to 80.50 - former support which has now turned into resistance.   On the daily chart the dollar does not look good and it is definitely in a downtrend, which is supportive of higher gold prices.  From the weekly timeframe, the dollar looks more positive; it continues to retreat from its highs of 85, but remains in an uptrend, even though it is dropping down towards mid-range support at 79.  The takeaway - in spite of what you might read, the chart says no dollar collapse is occurring just yet, even though the buck has had a bad time the past few months.  I wouldn't worry about a serious dollar collapse until it breaks its 2011 low of 73.  My thought: in the daily timeframe, dollar looks weak and will most likely continue to move down.  Longer term, the dollar remains the safe haven even after No Taper, and it will most likely rise with any renewed crisis elsewhere in the world.

After the huge high volume rally yesterday, GDX sold off today - it was down -3.15% on very heavy volume, giving back perhaps 40% of its move from yesterday.  It seemed to find support at its 50 MA.  No doubt some new longs were washed out on the profit taking today.  GDXJ was off -4%, volume was heavy there as well.  But as long as GDX prices remain above the lows, the rebound is still valid, and the higher gold prices should drag the miners higher in time.  If the 50 MA continues to provide good support for GDX, this could be a good entry point for traders who missed the move up yesterday and are looking to get on board the train.  Also remember, all miners are not created equal.  SLW retreated only -1.71% today and is well above its 50 MA and now looks as though it will break above its 200 MA with its next move up, while SSRI dropped -5.3% and appears to be far from any move above its 50 MA.  These are examples, not recommendations.

4 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5420
INR - remember when?

Remember when...the rupee was in the news (don't tell me, that was so "last week") and it seemed destined to turn into toilet paper any moment now?  This chart is a perfect example of why you don't buy that sort of newsflow.  Once that kind of news makes it into the popular press, the issue is likely nearing its peak.  Back in early September, news stories were screaming how the rupee was hitting all time highs, how the Indian central bank was trying vainly to stop its move higher...and then what happened?

We don't hear so much about it now, do we?

I'm not suggesting "buy Rupee" - although if you HAD bought at the peak, you'd be sitting on a 10% gain in three weeks!  Its just an illustration of how newsflow intensity can be used as a contrary indicator.  I wrote on Aug 31 about how I guessed INR/USD was most likely at a capitulation/peak given the intensity of the newsflow at that time.  As luck would have it, I called the top within a day or so.

It turns out that most of the emerging market currencies peaked in early September: Mexican Peso, the Ruble, the Brazilian Real, the Thai Baht, and the Indian Rupee.  But we don't hear about any followup stories about that, nor do the stories have charts in them.  If we imagine that No Taper solved the EM currency issue - do the charts support this storyline?  No, they don't.  Look at the chart below.  Rupee peaked September 1, and No Taper didn't occur until September 18th.

Anyhow, just some food for thought.  If I were a betting man, I'd bet that the big bank prop desks were covering their INR/USD shorts at the same time the financial press was screaming about how INR was collapsing.  LIkely the public and various large companies started placing bets (and or initiated hedges) on the decline of the rupee near the top, and are now sitting on 10% losses.  And that's why you don't place your trades based on newsflow, in any market.

Among my trader friends, we call the financial tv shows "Financial Entertainment TV" or FETV for short.  Cramer is a prime example, but there are many, many other providers of Financial Entertainment, which I do my best to ignore.  I stick with the charts.  Unlike FETV, charts don't lie, or have some political axe to grind, or are manipulated by those in industry, or talk their book.


 

redcloud's picture
redcloud
Status: Bronze Member (Offline)
Joined: Mar 12 2009
Posts: 31
Reasons for gold price declines

I ran across this article from Hard Assests Alliance linking declines in the price of gold to the demands from Venezuela and Germany for repatriation of their offshore gold assets.  Probably old news to some, but a deeper analysis than I've seen before.

If the link doesn't take you directly to the article look on the page for "Grant Williams on the Downturn in the Spot Gold Price".

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1447
redcloud wrote: I ran across
redcloud wrote:

I ran across this article from Hard Assests Alliance linking declines in the price of gold to the demands from Venezuela and Germany for repatriation of their offshore gold assets.  Probably old news to some, but a deeper analysis than I've seen before.

If the link doesn't take you directly to the article look on the page for "Grant Williams on the Downturn in the Spot Gold Price".

The big question is how did this big entity acquire the paper GLD without spiking its price.   Was GLD created out of thine air?

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1447
GLD Paper Smash
redcloud wrote:

I ran across this article from Hard Assests Alliance linking declines in the price of gold to the demands from Venezuela and Germany for repatriation of their offshore gold assets.  Probably old news to some, but a deeper analysis than I've seen before.

If the link doesn't take you directly to the article look on the page for "Grant Williams on the Downturn in the Spot Gold Price".

The big question is how did this big entity acquire the paper GLD without spiking its price.   Was GLD created out of thine air?

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