PM Daily Market Commentary - 6/11/2014

davefairtex
By davefairtex on Wed, Jun 11, 2014 - 11:27pm

Gold closed up +0.90 to 1260.90 on light volume, while silver closed flat at 19.18 on moderate volume.  Both metals traded sideways within a range today; both scored new highs (gold: 1265, silver: 19.33) but after the usual flurry of short-covering, neither metal was able to sustain the break higher into the close.

The buck too traded in a range, closing down -0.01% to 80.82.  It also made a new high but fell back, unable to sustain higher prices.

The real price action today was in the mining shares - it was an eventful day, with an early morning rally, a headfake lower around mid-day, followed by a strong rally into the close.  GDX was up +1.65% on moderately heavy volume, while GDXJ was up +2.97% on very heavy volume.  The miners look quite strong right now; what looked like a profit-taking selloff mid-day was strongly bought, which suggests to me that there might be more upside room for the miners which are now looking a bit overbought.

You can see in the chart below that the juniors pushed right up to resistance at the confluence of the the 200 MA and the previous high on heavy volume.  A move through this level would be quite bullish, since the more likely outcome would be perhaps a day or two of rest at these levels before moving higher.

It is a matter of some concern to me that the metals aren't moving quite so enthusiastically.  Gold's chart looks weak - it is inching higher on declining volume, which makes me nervous because often that pattern has a bad outcome to it.  Shorts look at that sort of pattern as an invitation to jump in once prices reach a known resistance level.   Overall, miners are definitely leading, but at some point gold and silver will have to follow along as well or else the miner rally will run out of gas.

SPX had a rare down day, closing off -7 to 1943.  VIX rose back to 11.60 showing a bit of a pulse.  I get the sense miners do well when SPX is flat or down, perhaps due to money rotation.

Bonds (TLT) look to be finding support on their 50 MA, closing up +0.18% today.  If the market does correct, hiding out in TLT along with the rest of the paperbugs is a lower risk alternative to actually trying to go short.  At least you get to collect that 3.2% yearly interest payment for the time you are there, as opposed to paying the dividend on a short sale and/or experiencing that lovely time decay if you buy a put.

 

6 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
Pt/Pd vs. Au/Ag

Strange divergence today - did South Africa just get "fixed";

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
big moves today

SPX looks to be tipping over, off -13, lead down by retail & industrials.

TLT (long bonds) up a big +0.94% after a strong 30 year treasury auction.

GDX +2.5% and GDXJ +4% - looking amazingly strong. 

Gold +12, and especially silver +0.35 spiked up this morning and are continuing to rise - an especially good sign.

Things are happening...

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
Agreed... I am dipping toes again

Shit is getting real, as they say.  Miners in the third day of huge strength... shorts running for the hills.  That being said, I am not going to stand up and say that the (PM price) beatings are over.   

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
entry points

So Jim -

Just a caution - when I say something looks bullish, that's not the same thing as "a good entry point."

The most recent good entry point I saw was 5-6 days ago, when GDXJ was at 34.50 and broke above it.  Today, right now, is a high risk entry point.  Especially if you think the shorts the main fuel - which I agree with.  Once the shorts have covered, there won't be any buyers left at those elevated prices, and the price will most likely drop back down to earth again, until more buy-side support is found.  Thats how these things usually go.

Just be careful.  Daily RSI on GDXJ is 86.34.  That's really high.  FWIW that's about where the SPX finally gave up the ghost - around that level.

If you are feeling bad for missing out - that emotion is probably a sign you should be sitting on your hands rather than buying.  :-)

CEF having a surprisingly good day.  +2.46% when SLV is up +1.71%.

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
Thank you Dave...

Agreed that this is not a time to go all in... as I said, I would not be surprised at all if the beatings start anew after this wave of buying/short selling settles down.  

WRT CEF (which is both Silver and Gold, with no Physical redemption option), coming in to today it was sitting at neg. 6.3% premium to NAV... so I'll bet that a lot of that move was just related to compression of that fairly irrational level of discount.  

Part of what I am dipping my toes in to today is the new exchange traded Gold vehicle, OUNZ... for those who have not heard of it, you can read about it below.  This fund is even better than PHYS in one sense;  smaller investors can obtain physical delivery of their Gold in the form of coins;

      http://www.merkfunds.com/about-us/press/2014-05-14.html

I still like PHYS because they vault outside of the banking system, in Canada.  The downside of OUNZ, in my opinion, is this (from the prospectus);

The Custodian is JPMorgan Chase Bank, N.A. The Custodian is responsible for the safekeeping of the Trust’s
allocated gold and supplying inventory information to the Trustee and the Sponsor. The Custodian also is responsible for facilitating the transfer of gold in and out of the Trust and facilitating the shipment of London Bars to Delivery Applicants
.
The Custodian will deposit into the Trust Unallocated Account gold received from an Authorized Participant in exchange for Baskets. The Custodian will promptly convert the deposit to allocated London Bars. At the end of each business day, the Custodian may hold no more than 430 Fine Ounces of unallocated gold, which corresponds to the maximum weight of a London Bar, in the Trust Unallocated Account.  Unless otherwise agreed between the Trustee (as instructed by the Sponsor) and the Custodian, physical gold must be held by the Custodian at its London vault premises. The Trust’s gold holdings are subject to periodic audits and, under the Custody Agreement, the Custodian has agreed to permit physical gold auditors access to its premises during normal business hours to examine the gold held for the Trust and such records as they reasonably require

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