PM Daily Market Commentary - 10/8/2013

By davefairtex on Wed, Oct 9, 2013 - 2:02am

Gold closed down -3.50 to 1318.90 on moderate volume, with silver down -0.06 to 22.29 on moderate volume.  The gold/silver ratio was unchanged.  Both metals moved in a relatively narrow range today, making new highs and then closing down modestly.

The buck was up +0.11 [+0.14%] to 80.08.  It also had a narrow trading range closing relatively near the middle of its range.

SPX (S&P 500) was hammered hard today, down -20.67, through its 50 day moving average on heavy volume, closing at the low of the day.   The move down in SPX was most likely due to the whole political impasse in Washington.  The chart for SPX looks ugly - there's not much support in sight until SPX 1630, although I think it will move based on news rather than on technical support levels.  If I had to guess, I'd guess SPX will stage a good-sized rally once the government debt ceiling/budget issues are resolved but until then it looks to have dropped into an ugly selloff mode.

Surprisingly, commodities haven't seemed to be overly affected by this; we aren't currently in a period of "risk off".  One odd note - the short end of the US treasury market sold off hard today: 1 month yields jumped 14 basis points to 0.27%, 3 month jumped 2 basis points to 0.05%, 6 month was up 3 basis points to 0.09%, and 12 month was up 3 basis points to 0.15%.  That move in the 1-month treasury was definitely quite odd; I've heard reports that it would be most drastically affected by any default.

Given the very modest moves in PM, mining shares were hit hard.   GDX was down -3.13% on moderately heavy volume, GDXJ was off -3.89% on moderate volume.   GDX opened even, and then sold off all day, really falling off a cliff in the afternoon around the time of the President's press conference.  Miners had a very modest rally at end of day, perhaps just shorts ringing the cash register by covering before going home.  That GDX:GLD ratio today actually dropped below the lows hit in June, which tells me the sentiment in mining shares is simply awful.  Miners are in a serious downtrend, they made new lows today, broke an important support level, and until that GDX:GLD ratio starts to rebound, I believe they will continue downhill.

A number of miners are back to their June lows: AEM, NEM, PAAS, SSRI, NGD.  If these miners move below their June lows, the selling in them will intensify, as traders who bought back in June bail out and shorts "sell the breakdown".  Its an ugly picture out there right now.  I can't tell just why this is, but traders right now just don't want to buy miners and until that sentiment changes, I wouldn't be a buyer.

Here's an example of a miner that broke its support level; SLW was in a descending triangle pattern that ended badly today; it was off -5%, much worse than the index.  SLW was actually doing pretty well compared to many other miners right up until it "broke support".


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