PM Daily Market Commentary - 10/9/2013

By davefairtex on Thu, Oct 10, 2013 - 1:46am

Gold closed down -11.90 to 1307.00 on heavy volume, with silver down -0.40 to 21.89 on moderate volume.  The gold/silver ratio rose +0.54 to 59.71.  Silver was hit substantially harder than gold; selling started in asia and didn't stop until late morning trading in NY.  Silver's rebound was very modest, while gold recovered somewhat more of its losses.  Silver ended up closing below its 50 day MA; it is still showing a short term pattern of higher lows, but any close below 21.50 and that modestly bullish trend would end.

The buck was up +0.38 [+0.47%] to 80.46.  It rallied pretty much all day long, moving up steadily from a slightly lower open in asia.  Dollar strength may have encouraged gold to sell off - the pattern of the dollar move up roughly corresponds to gold's all-day fall.  The buck seems to have found support at 80.

A number of other commodities sold off today as well; copper was down -1.91%, oil was down -2.03%, both on heavy volume.  Oddly, long term treasury bonds also sold off, down -0.80% too.  To further confound things, SPX was flat, and printed a relatively high volume doji - a sign of a possible reversal.  It is very much of a mixed bag - I think this shutdown has confused everything, and there is little economic news being released right now which just adds to the fun.

Gold mining shares, I have to say it, they did well today.  GDX was up +0.42% on moderate volume, while GDXJ was down -1.30% also on moderate volume.  Miners opened lower, sold off hard for the first half hour, and then proceeded to rally modestly for the rest of the day, closing substantially above the open price.  This early-AM flush, coming on the heels of yesterday's big drop and a number of miners making new yearly lows tells me this may well have been a drive to get any remaining miner longs to capitulate - to give up and sell after a 2-month-long downside move.  They say "the show is not over until the fat lady sings", and in these sorts of things, often a downside move will not end until there is a capitulation flush after a support break.  We will know more tomorrow.  Moves above today's highs will be confirmation of the rebound, although its important that they also close above those highs and not just jump above them and then sell off.

My sole concern is that the volume attached to this rebound is lighter than I would like.  The heavier the volume, the more emphatic the signal is.

Here's a chart of SLW - yesterday we had the nasty red candle after the support break, and today we see a nice doji on pretty decent volume.  Volume was not as good as the Fed No Taper Day, but it was higher than the last week or so. 

As I mentioned the other day, SLW is actually one of the better-behaved miners.  Some others made new year lows today.  Here's a chart of PAAS.  You can see that while SLW has maintained its pattern of higher lows and higher highs - a bullish configuration, PAAS has made new lows, which is a sign of a continuing downtrend.  You can also see this in the 50 day MA - SLW's 50 is flat, while PAAS has a distinct downward slope to it.  The move below 11.50 back in early September was your clue to bail out of your PAAS position, while you received no such signal for your SLW holdings.

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