PM Daily Market Commentary - 2/19/2014

By davefairtex on Wed, Feb 19, 2014 - 11:38pm

Gold closed down -11.40 on moderate volume, while silver was off -0.42 on heavy volume.  This is the first down day in 10 trading sessions for gold.  The gold/silver ratio rose +0.65 to 60.88.  Gold traded sideways with a downward bias up until the FOMC minutes release at 1400 EST, after which it fell modestly into the close.  Silver did the same thing, only the drop after 1400 was more substantial.

The USD rose +0.17 [+0.21%] to 80.22, rebounding off 80 support.  The dollar has endured a large number of down days in the last few weeks, and it was looking to rally at some point.  It looks like the FOMC minutes was the excuse.

Even with the buck higher, commodities continued to rally - from my standpoint, a surprising outcome.  With an RSI-7 of 94 (meaning: commodities are extremely overbought) they should have corrected along with gold and silver, but they did not.  Continued upward movement of commodities is bullish for PM, but - really, I'm not sure how much longer this leg of the commodity rally can last.

As expected mining shares have started to correct; GDX was off -3.14% on heavy volume, while GDXJ was down a big -6.81% on extremely heavy volume.  When bullish price moves get this extended, the corrections off the highs can be intense.  Volume on GDXJ suggests a lot of traders are ringing the cash register on the big move off the lows.  Now we have to watch and see when the buyers for mining shares start to appear.  Last time, buyers appeared the very next day.

SPX (US equities) dropped 12 points (-0.65%) on good volume today - SPX tried making a new high and failed.  Failed attempts at a high are a signal to the shorts to start loading up.  Some downside indicators:

* banks (which usually lead higher) have been doing terribly - they barely made it back across their 50 MA, and the selloff in banks today was more intense than the broader market ($BKX bank index was off -1.98%).

* $TRAN (DJ transports) are underperforming $INDU (the DJIA), which is bearish.

* SPX has had declining up-day volume as equities have rallied

* SPX was unable to make a new high.



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