PM Daily Market Commentary - 4/9/2014

davefairtex
By davefairtex on Wed, Apr 9, 2014 - 7:28pm

Gold closed up +4.70 to 1312.70 on 1308 on moderate volume; silver was down -0.21 to 19.85 on heavy volume.  Both metals sold off during London trading, bottoming before the open in NY.  Silver was especially hard-hit, touching 19.60 at one point on a high-volume down-spike stopping out a number of longs.  However the FOMC minutes release at 1400 EDT caused both silver and gold to spike higher; apparently someone was pleasantly surprised by the contents.

What's the big news from the FOMC release?  Nothing that I could see.  Tapering will continue, rates will remain low for a long time, and they'll change stuff around if things get too crazy in either direction.  But who am I to argue with prices?

Silver is looking particularly bad again - it almost made a new cycle low, volume was heavy, it didn't recover completely from its dip pre-market, and this has pushed the gold/silver ratio back up to 66.13, quite close to its 2014 high.

The buck dropped again today; it traded modestly lower until the FOMC minutes release, after which it spiked down, eventually closing down -0.25 to 79.58.  The past three days has not been kind to the dollar, and today's move down in the buck finally seemed to help gold and silver.  The longer term support for the buck is at 79; we're still a ways away from there, but if one of these news events manages to push the buck below that level, it will likely result in a whole lot of dollar selling.  If Draghi refrains from printing (and although he sure talks about it a lot, the market doesn't seem convinced) the credit contraction in the eurozone that is leading inexorably to deflation will help the euro, and push the dollar lower - which will be bullish for gold.  A rising currency in a deflationary situation makes debt more difficult to pay off.

If and when the US actually has credit contraction (likely via debt defaults), that will be quite bullish for the buck - which in turn will tend to depress commodity prices, which includes gold & silver.

GDX was down early, but rallied on the FOMC minutes release, up +0.76% on moderate volume.  GDXJ was up +0.66% on light volume.  Once again, the mining shares didn't close at the highs, didn't show any great volume, and are generally looking lackluster even though they are rallying.  I hate to be a nay-sayer but - compared to other things that are rallying strongly (Facebook - yuk, +7.25% on heavy volume) the miners just look sluggish.  This tells me the buying interest isn't particularly strong - and that leads me to believe the downtrend momentum is still largely intact.

SPX rallied strongly, +20 to 1872 on good volume.  I guess that's it for our two-day 2.7% correction.  When this market finally breaks lower its going to be a doozy, but in the meantime going short has been a fool's errand.

 

2 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
SPX: something dangerous

SPX tried moving up this morning, failed twice, and is now selling off.  A failure to make a new high is dangerous territory with all the distribution that has come before.  A failure of 1840 support will definitely lead to a much more serious sell-off, and it may well happen today.

Wow.  Down 1.3% and the day is only half over.

More clues: QQQ (nasdaq) is really getting crushed, as are some of our favorite high fliers and perhaps most importantly, the bank stocks.  The $BKX (bank index) has plunged to new lows for this cycle.  And TLT (20 year treasury bonds) is screaming higher too.  Stuff seems to be aligning for a good sized move lower in SPX.

If that 50 MA/1840 support doesn't hold, there could be a lot of traders that will all want through that exit door...at the same time...

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
So much for that line in the sand
davefairtex wrote:

SPX tried moving up this morning, failed twice, and is now selling off.  A failure to make a new high is dangerous territory with all the distribution that has come before.  A failure of 1840 support will definitely lead to a much more serious sell-off, and it may well happen today.

Wow.  Down 1.3% and the day is only half over.

More clues: QQQ (nasdaq) is really getting crushed, as are some of our favorite high fliers and perhaps most importantly, the bank stocks.  The $BKX (bank index) has plunged to new lows for this cycle.  And TLT (20 year treasury bonds) is screaming higher too.  Stuff seems to be aligning for a good sized move lower in SPX.

If that 50 MA/1840 support doesn't hold, there could be a lot of traders that will all want through that exit door...at the same time...

Well, that's a done deal.  Lord help the longs if reality decides to play a sudden bout of catch up to the fundamentals.

Scratch that...let's first worry about these guys:

(Source)

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