PM Daily Market Commentary - 6/24/2014

By davefairtex on Wed, Jun 25, 2014 - 12:53am

Gold closed up +0.70 to 1319.10 on moderately heavy volume; silver was up +0.03 to 20.92 on very heavy volume.  PM traded higher in London, making fresh new intraday highs (gold 1326, silver 21.17) but was unable to hold them, selling off into the NY close to end the day almost flat.  This caused both gold and silver to print almost-doji candles, which combined with heavy volume, the current uptrend, and the strongly overbought conditions appear to be a clear reversal signal.

The buck rose today, closing up +0.06 to 80.39, seemingly content to meander lower.  Moves in the dollar doesn't seem to have much of an effect on PM prices right now.

Miners seemed to anticipate the doji print in gold & silver, selling off at the open, bouncing back with a brief mid-day rally, only to sell off hard into the close.  GDX was off -3.05% on heavy volume, while GDXJ was down -4.74% on very heavy volume.  GDXJ had a particularly bad selloff in the last 30 minutes of trading, where it dropped 3.7% in the last 30 minutes.  Traders often see this period as a time of decision, when the professionals have to figure out if they want to keep a particular holding overnight, or bail - interesting things often happen in the last 30 minutes.  As they did in GDXJ today.

Both mining ETFs formed ugly and relatively high volume "bearish engulfing" candlesticks, which can be decent signals of a trend reversal (although I tend to like dojis better).  And since miners have been leading PM during the recent rally, it is probable they are signaling the correction in metal I have been warning of for a while now.  Silver has been floating around at RSI-7 levels of 94-95 for almost a week now, and it is extremely unusual for a correction not to occur when price levels are that overbought.  My opinion: the failure of gold and silver to hold their new highs was all the trigger needed for the miners to sell off.

SPX attempted to move higher today, scoring a new intraday all time high of 1968 but then sold off for the rest of the day, closing down -13 to 1950.  A strong correction in energy stocks (mostly the smaller producers) helped drag the index lower.  Energy equities had been outperforming the SPX until today. This caused the VIX to move up to 12.18.

TLT (bonds) rallied strongly, up +1.01% but still remains within the recent trading range near the 50 MA.

Brent crude moved up +0.34 to 114.46.  Having retreated a bit from the 115 level over the last few days, Brent crude seems now to be trying to determine if it wants to move higher.  Likely where it goes next depends on the situation in Iraq.



davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
mainstream investment managers

David Stockman had some well-known but important observations about how mainstream investment managers work - and how that impacts the decisions they make.  "What are they thinking?"  Well...

  • Your mutual fund manager is PAID to pace the returns of their benchmark index. 
  • They are not paid to worry about YOUR investment position.
  • If the index rises by 10% and the fund rises by 9% – you take assets from that fund to move them to a fund that was up 10%.
  • Therefore, the “risk” to a fund manager is the LOSS of assets by underperforming the benchmark index.  Fewer assets under management – lower income, or loss of job, for the manager.
  • However, you THINK that this manager is going to “manage” the fund to protect YOUR money when the market declines. 
  • However, if the manager “sells high” and misses a further rise in the markets waiting to “buy low,” you take your assets away from that manager to move it to a manager who is chasing performance.
  • When the market “corrects” and you lose roughly as much as the market, you now get angry that the manager did not “get out of the market” to protect YOU – even though YOU wanted him to match the index.

This is why it is exceedingly important to remember that YOUR investment goals and objectives have nothing to do with a benchmark index.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
US Q1 GDP: revised down from -1.7% to -2.9%

I'm shocked, simply shocked.  Readers of consumer metrics would have known this already.  I am moderately surprised it didn't take the BEA 4 quarters to fess up to the reality, however.

The -2.9% print did give gold a momentary burst higher - hitting 1322, with silver touching 21.05.  Perhaps the miners were wrong about the impending PM correction...time will tell.


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