PM Daily Market Commentary - 3/19/2014

By davefairtex on Wed, Mar 19, 2014 - 5:12pm

Gold closed down -24.90 to 1330.40 on very heavy volume.  Silver dropped -0.20 to 20.62 on moderately heavy volume.  Gold started dropping in Asia and continued downhill into the NY trading session.  Immediately prior to the FOMC release at 2pm, was already down around $20.  When the FOMC release hit the wires, gold rolled over and sank another $10 closing near its low.  Silver couldn't decide if it was going to follow copper or gold - and so it split the difference, dropping, but not as severely as gold.

Silver is near a relatively strong support zone at 20.50 in addition to its 50 day MA at 20.55.  It bounced off 20.50 twice today.  If copper does relatively well and silver holds here, it might be a buy.

Gold on the other hand is not looking as good.  It had a bigger volume spike today (i.e. there was more selling that happened), the support at 1320 doesn't look quite as strong, there is no moving average support until perhaps 1300...and the miners look bad so it feels like gold has some more downside left to it.

The dollar had an extremely strong day; it was unchanged until 2pm; after the FOMC press release came out, the buck blasted higher, eventually closing +0.62 [+0.79%] to 80.15.  Apparently, the continued taper (or some other element of the FOMC press release) was a positive surprise to the currency traders, who saw further tapering as reason to buy the dollar.

GDX was hammered, down -3.75% on extremely heavy volume, and GDXJ was of course hit even harder, down -5.12% also on extremely heavy volume.  Both miner ETFs had traded mostly sideways prior to 2pm, but they both fell off a cliff after the FOMC release and were sold for the remainder of the day, closing at the dead lows.  No buyers showed up at all, every rally attempt was used as an opportunity to sell.  Likely, this means more downside tomorrow.  Hopefully GDX can find support on the confluence of its 50 & 200 MAs at around 24.75.

GDX:$GOLD was hit hard, GDXJ:GDX moved lower, the only positive note was that the gold/silver ratio actually dropped, since silver for a change outperformed gold - likely because copper probably made a bottom today based on price action and volume.

Now that's the kind of price signal I like to see to identify a low.  Shorts tried pushing copper lower, succeeded in causing a breakdown that was quickly bought, forcing shorts to cover resulting in a rapid move higher.  Now momentum is on the side of the longs.  A close above 3.00 tomorrow will confirm the low.

And notice how silver happened to outperform gold today - on the very day copper puts in a day like this.  The markets are often all connected, but its up to us to figure out the linkages.  Mainstream media sure won't tell you, and the actual traders who comment on Financial Entertainment TV have no interest in "tapping the glass and disturbing all the fish" - unless of course it encourages you to buy what they already own.

And remember the news often trails the prices.  If copper continues its rally tomorrow with a close above 3.00, I would expect to see some positive China news at some point.  Just my guess of course.

Commodities were up +0.11% today, more or less moving sideways within a consolidation range.

SPX didn't particularly like the FOMC meeting release either, closing down -11.48 on some pretty good volume, tipping over right at 2pm along with PM.  SPX is now showing signs of more distribution - down-day volume is now higher than up-day volume.  It is just possible that SPX has put in a "lower high" today, which is something to watch going forward.  We know that the past two times printing stopped, the SPX tipped over and sank relatively soon afterwards.  I only bring this up because of the market's reaction to the FOMC meeting - again, its not the news (tapering, specific Yellen-speak, etc) that matters, its the market's reaction to the news that counts.  And the equity market doesn't seem to like it.  We'll see if it feels the same way tomorrow.

If the market breaks below 1840 with any kind of volume, it could lead to a lot of selling.  Remember, there are a lot of traders who have vowed to rush out the door before the fire starts.  And a "lower high" is that first whiff of smoke.


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