PM Daily Market Commentary - 5/7/2014

By davefairtex on Wed, May 7, 2014 - 8:18pm

Gold was pounded today, closing down -18.00 to 1289.70 on very heavy volume.  Silver dropped a bit less, closing off -0.25 to 19.33 on moderately heavy volume.  Gold rose during the asia trading session, only to be slowly driven lower during London trading.  At exactly 1000 EDT, gold was pounded hard through 1300 on an $8 one-minute down spike, with 5000 long contracts stopped out within that one minute.  The price move wasn't massive, but the volume sure was.  After the spike, gold continued lower, eventually bottoming out at 1286, rebounding only modestly into the close.

What caused the spike?  Well, some articles suggested the 10am move was about Janet Yellen's testimony before Congress that hinted tapering will continue; perhaps her statement was released at exactly 10am.  Maybe.  But overall, it looked like the shorts just decided to attack today.  Perhaps they were emboldened by the recent lackluster performance of the PM complex overall.  Certainly gold's inability to move past its 50 MA for 3 straight days was bearish, as was the lack of buyers in the mining shares.

If we get a close below 1280, it could lead to a fair amount of selling.  And the big volume today on the move down has me concerned.

The dollar rebounded a bit today, up +0.11 to 79.26.  A small rebound after a big move down is to be expected.  Dollar shorts can be expected to renew the attack once the bounce has exhausted itself.

With the big drop in gold, the miners sold off today, with GDX down -1.94% on moderate volume, and GDXJ off -3.35% on heavy volume.  The juniors appear to be leading PM lower at this point, which is a bearish sign.

Sellers drove the US equity market through the 50 MA right after the market open, but then of course the dip-buyers appeared and pushed the market back into the green, eventually closing +10 at 1878, on some pretty heavy volume.  It looks like most of the volume happened on the move through the 50 MA in the early part of the session.  Of all the sectors, the large cap stocks are doing the best: the small cap Russell 2000 is down 9% from the highs and is now below all 3 of its moving averages (bearish), while SPX is off only 0.7% and it remains above all 3 moving averages (still quite bullish).


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