PM Daily Market Commentary - 4/15/2014

davefairtex
By davefairtex on Wed, Apr 16, 2014 - 12:06am

Gold closed down -24.40 to 1302.70 on extremely heavy volume - silver was off -0.38 to 19.58 also on extremely heavy volume.  The shorts started in on PM early in asia trading, and as the day wore on, they kept hammering gold until the price finally collapsed at 8:27 am in NY where gold spiked down $14 in one minute knifing clean through the 200 day MA, liquidating 4k long contracts and briefly touching 1284.

Reading some of the other sites, you might get the idea that the downspike was a strike from a clear blue sky.  It wasn't - it was just the last and most dramatic in a chain of short assaults, and it happened with gold at around 1298 - after gold had already dropped $30 or so from its open at 1327.  My guess: that last assault was deliberately structured to trip the long-side stops hovering right under the psychologically important 1300 level.

However even with all the drama, gold still did not make a cycle low today, and it rebounded regaining about half of its losses, with buyers pushing gold back above that 1300 level - all of that big dramatic spike down was erased.  Silver was not so fortunate - it hit 19.22, and its rebound was not nearly as strong.  Copper behaved quite similarly to silver, selling off at about the same time (0800-0830 EDT) on some pretty high volume, although neither copper nor silver had the massive downspike that gold did.

The buck closed up modestly, +0.06 to 78.89.   Today the dollar was just a bystander.

GDX opened lower on gold's pre-market hammering, but rallied into the close trimming its earlier losses by about half.  GDX was down -2.04% on heavy volume.  GDXJ was off -3.70% on very heavy volume, making a new cycle low in the process.  GDXJ is leading GDX lower, which is bearish.  Today's move lower in the miners was not entirely unexpected, since miners have been looking ill for the past four days or so, but it was not as bad as it could have been.  Miners closed at or near the highs for the day and there was some moderately strong buying strength, which is positive.

SPX was volatile today, first testing the lows and then rocketing higher in the last part of the session.  SPX closed up +12 on moderately heavy volume, ending up right below its 50 day MA.

One might ask why gold was pounded today, rather than (say) yesterday, or another day.  I don't know.   Thing is, its not the downspike that matters, its what happens afterwards - that's the key.  Buyers did appear, but only enough of them to push price back above 1300.  The reaction afterwards helps us to gauge the strength of the buy-side interest.  Right now, its there, but a bit lukewarm.

Silver seems weak - the danger is we test 19 support again, and if copper doesn't rally I think that's probably what we'll see.  Copper is about China, and copper's weakness today suggests China's issues remain somewhat serious.  I've maintained for a while that all the loose change over there is due to credit growth, and a bout of (relative) deflation will end up drying up some chunk of the marginal commodity purchasing.  Theories are fine - we'll see what really happens.

4 Comments

1micahsh's picture
1micahsh
Status: Member (Offline)
Joined: Aug 15 2009
Posts: 3
Volume

Dave,

Thanks for your daily analysis on PM.  I find it most interesting. 

Mindful that you want participants to learn to fish, not just take handouts, I'm rather a novice to all of this and have a question.  When you say that Au was down on heavy volume, but (like yesterday) we know that the day involved down spikes and then a partial recovery, what does the volume number tell us?   I assume that it is the total amount gold that exchanged hands.  But if that's true, don't we need to know if the large volume (or what percentage of it) was exchanged as the price was falling versus rising to make sense of what volume is telling us about price?  I hope that make sense.  Thank you again, 

1micahsh  

1micahsh's picture
1micahsh
Status: Member (Offline)
Joined: Aug 15 2009
Posts: 3
Nevermind

I think I've answered my own question.  Sorry to bother. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
price & volume

1micahsh-

When volume is large, it tells me that whatever action took place involved a whole lot of money changing hands.  This adds emphasis to whatever interpretation we put on the day's price action.

So if its a nifty rebound - high volume makes a trend change more likely.  If its a big downside move, that makes the feeling in the market look even more dismal, and a continued downside move more likely.  Yesterday's move was in the middle, but leaning somewhat bearish.

In this case, breaking 1300 and then partially rebounding tells me a lot of longs were stopped out on the spike down, and then a reasonable number of new shorts were stopped out on the rebound - this picture is easier to see intraday: the entire last $14 downspike was entirely eaten up by the rebound, which is generally a bullish thing to see.

Possibly: "there is decent buy-side interest on moves below 1300" - at least so far anyway.

 

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 656
If Rickards is correct

see pages 265-304 of the Death of Money for his analysis, especially pp 278, 279 and following.

There has to be a REBALANCING of GOLD between Germany, Russia, the US, and especially CHINA

before inflation is allowed to rear its ugly head.  GOLD manipulation/suppression is the name of the game to do this.  And the BIG BOYS know this and act accordingly.

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