PM Daily Market Commentary - 7/1/2014

By davefairtex on Wed, Jul 2, 2014 - 2:58am

Gold closed down -0.80 to 1327.00 on moderately heavy volume; silver was up +0.02 to 21.08 on heavy volume.  Gold tracked sideways for most of the day, with a momentary spike higher at 2100 EDT which hit a new high of 1334, breaking above resistance and stopping out a bunch of shorts.  Silver's pattern was a bit different, with its spike higher coming at around 1100 EDT, hitting 21.27.  Both gold and silver closed more or less where they started, printing doji candles.

Hitting new highs and then printing a doji is often a sign of a top.  It requires confirmation (a close below today's low) but after a long run higher and being right at a logical resistance point, a correction would not be a surprising result.  Both silver and gold have printed a "new high doji" before during this run up, so its not like a doji is a sure thing signal of doom ahead.

The buck may have put in a low today for this cycle, closing up +0.03 to 79.84.  It too printed a doji.  The dollar is oversold, and while the linkage isn't perfect, since early June the dollar has "mostly" retreated during PM's big move higher.

Mining shares were off a bit today, with GDX down -0.79% on moderately heavy volume, and GDXJ down -2.25% on heavy volume.  GDX hit a new high right at the open, and then sold off mildly all day long.  GDXJ's pattern was similar, except it has been lagging GDX so it did not score a new high, and just sold off a bit more.

The whole picture to me: the dollar perhaps bottoming, GDX distributing & with its RSI divergence, GDXJ lagging GDX, gold & silver printing their dojis and gold at 1330 resistance while dreadfully overbought, all together it is suggesting an increasing likelihood that we have a PM correction in the offing.  No one bit of evidence is conclusive, but taken together it seems to be more solid.  Of course I've been saying that for a while now, and nothing has happened!  But this time the sky really is falling!

The SPX broke out to new highs, closing up +13 to 1973.  Market moved sharply higher starting from the opening bell in NY through the early afternoon, but faded into the close.  We had some good ISM reports that were released at 1000 EDT that seemed to help push things higher, but who can say for certain?  Tech and the Nasdaq have been doing very well making repeated new highs, and even biotech is almost back to its old highs.  It's a steady diet of elves and unicorns - bad news leads to brief drops and dip-buying, while good news leads to markets breaking out to new highs!  Probably not the best time to be going short.  VIX dropped to 11.15 - perhaps not as far as one might have expected after today's breakout.

TLT (bonds) dropped sharply, off -0.84%, but most of the move came long before the equity market opened, so this bond market move wasn't about our SPX breakout.  I'm not sure what caused it - bond futures started dropping in asia trading long before the US market opened.

Brent crude stabilized today, closing down -0.07 to 112.29.  The 111-112 price range should provide some support for brent crude.


1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5740
silver is back

After getting hit this AM at 0815 by a surprisingly strong ADP payroll report for a loss of about $0.20, silver  rebounded and is now moving to new cycle highs.

Amazingly strong.

GDX looks strong, with GDXJ lagging a bit behind.

Not what I thought was going to happen, but I'll take it nonetheless!

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