PM Daily Market Commentary - 5/27/2014

davefairtex
By davefairtex on Tue, May 27, 2014 - 7:00pm

Gold was hammered today, dropping -29.60 to 1263.40 on exceptionally heavy volume.  Silver fell -0.42 to 19.05 on very heavy volume.  After trading sideways during the morning session in asia, gold was repeatedly hit hard for the rest of the day, hitting its low point at the close of trading in NY.  While gold made a new cycle low, silver fell proportionally less, failed to make a new low, and seemed to find support at just above 19 - a relative bright spot on a bad day for PM.

Trader Dan suggests gold's breakdown today is all about the for-now peaceful resolution to the Ukraine situation - he thinks that the support underlying gold at 1280-1290 was all about the safe haven bid from people worried about war with Russia and the west.  As always its hard to know - its a theory and its as good as any other.  Certainly the resolution of our long wedge formation to the downside right after Ukraine gets at least some kind of interim resolution is an interesting coincidence.

http://traderdannorcini.blogspot.com/2014/05/gold-gives-up-ukraine-premium-as-bears.html

The buck was flat today - but rose yesterday during the Memorial Day holiday in the US, closing right up against its 200 day MA.  The dollar is getting a bit overbought, and may be due for a rest, especially with the resistance of the 200 MA.  If it stops rising here, it theoretically should help gold - but my guess is gold's breakdown velocity will likely trump any positive influence from a possible dollar decline.

GDX gapped down at the open breaking support, and then sold off hard for the first half of the trading session in NY.  GDX then failed to rally and closed at the dead lows of the day, off -3.86% on heavy volume.  GDXJ dropped -4.81% on extremely heavy volume, behaving much the same as GDX.  Both GDX and GDXJ made new cycle lows.  The GDX:$GOLD ratio dropped to new lows.  It was an ugly day for the mining shares, a logical conclusion to a month of slow daily drops in mining share prices and declining daily trading volume.  And when the intraday trading patterns looks like this, at the same time there is a break below support, my experience is that we probably have more downside to come.

SPX broke out to a new all time closing high, up +11 to 1912 on ok volume.  More interestingly, the QQQ (Nasdaq ETF) has gone vertical, almost catching up to SPX.  Other indicators are also showing risk on, including a very low VIX (11.51), rallying high flying biotech (IBB) +2.48%, and technology stocks breaking out further.  Money is clearly flowing out of commodities (and gold) and into equities.

Gold's downside velocity and lack of any sort of rally intraday appears bearish for the near term.  Even though "gold is getting cheaper" and once again is starting to drop below costs of production for some of the higher cost miners, my experience is it is probably best to wait for signs of other buyers showing up at the COMEX before plunking your money down in the hopes that a bottom has occurred.

 

3 Comments

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1428
Thanks for the Hammer

Thanks for the Hammer!  Bought more gold at low.  So predictable now until the collapse.

War in Donestk is peace???

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
More carrying of the cartel's water...

Dave said, 

Trader Dan suggests gold's breakdown today is all about the for-now peaceful resolution to the Ukraine situation - he thinks that the support underlying gold at 1280-1290 was all about the safe haven bid from people worried about war with Russia and the west.  As always its hard to know - its a theory and its as good as any other.

This theory is not as good as any other since it is just a regurgitation of the mainstream media's propaganda cover story for yesterday's Gold price hit,

  http://www.bloomberg.com/news/2014-05-27/gold-trades-below-1-300-on-new-...

  “The surge in the equity market continues to push gold lower,” George Gero, a vice president and precious-metal strategist in New York at RBC Capital Markets, said in a telephone interview. “The fear premium because of Ukraine has lessened.”

What really happened?  Duh.. it's options expiration time again on the crooked Comex;

http://jessescrossroadscafe.blogspot.com/2014/05/gold-daily-and-silver-w...

As I reminded several times last week, today was an option expiration on the Comex for the precious metals, for the important June contract.

The metals were hit in an attempt at a 'mini-puke' in the manner of the Barclays digital options two-step, and for much the same reasons.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
that could be too

JimH-

The metals were hit in an attempt at a 'mini-puke' in the manner of the Barclays digital options two-step, and for much the same reasons.

Sure, that could be an explanation too.  It would of course depend on what the positions they held.  But there was no "puke" that I saw, no massive drop, no one-minute wonder of selling, just a steady set of waterfall moves lower.  Which made me think it was not one of the Barclay's Specials, but rather something else - it kind of felt to me like long capitulation.  Who knows though.  Your source seems certain about why.  I sure am not.  Perhaps your source has an inside source that tells him The Real Truth, while I can only watch from the outside and guess.

Kidding aside, it did seem like nobody wanted to buy the dips yesterday, unlike what happened over the past 4-5 weeks.  I'm not sure why that was - just that it seemed to be true, for whatever reason.

Miners were suggesting the next move would be down.  There has been zero buy-side enthusiasm in them for weeks.  GDX:$GOLD was ugly too.  You did see that too, right?  I might have mentioned it once or twice.  Perhaps the Cartel read my postings, and took full advantage.

Things look a bit better today.  Velocity seems to have slowed down a bit.  Gold and especially miners look oversold - might be ready for a bounce soon, the GDX RSI of 13 looks pretty low, but safest option is to let the market show us before guessing and trying to pick the low.

Silver seems to be hanging tough at 19.  If it can hold 19, it might give us a nice pop once gold rebounds.

Stronger dollar doesn't help.  Might assist things if it tops out.  Might also help if SPX tops out as well.

I do notice I tend to be seen as Cartel Local Representative whenever gold takes a drop.   If I only were to wise up and start blaming manipulation for every twitch down in the price of gold, I think I'd be more popular.

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