PM Daily Market Commentary - 3/20/2014

By davefairtex on Thu, Mar 20, 2014 - 11:02pm

Gold closed down -2.30 to 1330.40 on heavy volume, while silver dropped -0.34 to 20.28 on moderately heavy volume.  Gold continued downhill today, bouncing off 1320 support in London, but rebounding in NY to regain most of its losses.  Silver did much worse, dropping along with copper in London and never really recovering.

Silver has blown through its 20.50 "strong support", and its 50 day MA and its chart is looking terrible.  A strong dollar and weak copper conspire and we end up having bad days like this in silver.  I don't know where I'd put support - perhaps 19?  There is a whole lot of "air" once you lose 20.50.  And dropping below the 50 day MA was really a bad outcome.

This is a taste of why I think silver won't do well if we actually encounter serious debt deflation.  During the Great Depression, silver behaved terribly.

Gold actually did pretty well today, all things considering.  That 1320 support is actually looking relatively good.  Perhaps I'm just liking gold relative to silver - mainly because the gold chart is a whole lot stronger.  Notice how gold remains above its 50 and 200 MAs and it also found buyers at support, while silver is now below all of its moving averages and it just smashed through a pretty good buy point of 20.50 without even stopping.

The dollar continued its move up today, closing +0.22 [+0.27%] to 80.37.  A rising dollar is negative for commodities - including gold.  Market reaction to the Fed meeting looks dollar-positive and PM negative.  The buck stopped today at its 50 day MA - a move through its 50 MA will be bullish for the buck.

GDX caught a modest bid today, closing up +0.12% on light volume.  GDXJ did a bit better, closing up +1.09% on very heavy volume, the 50 and 200 MA acting as support.  Amusingly, both GDX and GDXJ had their golden cross today, signaling to longer term traders that it may be time to buy mining shares - just in time for the correction!  I wouldn't read too much into the miner move today; volume on GDX was relatively light, and one might expect a rally after three down days.

All of our ratios today are "risk off" - GDXJ:GDX is bearish, as is GDX:$GOLD.  The gold/silver ratio made a new cycle high today, hitting a level last seen July 2013, after the big gold crash, +0.97 to 65.49.  Gold/silver ratio is really looking bad.

Yesterday, the rebound in copper was really impressive - all it needed to do was close above 3 today and we'd be off to the races.  Of course that didn't happen.  Overnight in asia, copper was pounded right back down again into its recent trading range, closing at 2.93.  More defaults in China must be on the way, and it appears that the Chinese government isn't going to step in and "fix things."  At least not yet.

Commodities sold off today; perhaps copper dragged them down.  The commodity index closed off -1.51%.  The price chart still looks quite strong, but the index broke convincingly below its recent consolidation range, which suggests to me a larger correction is on the way for the commodity index.

And SPX - of course it rallied back today, entirely wiping out yesterday's losses.   Volume was strong too.  I'm not seeing a strong signal in either direction - and so when in doubt, bet on the trend to continue.  SPX is within 8 points of the all-time (closing) high.  Looks like the Teflon Market could end up ignoring tapering for one more Fed meeting.

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