PM Daily Market Commentary - 8/6/2014

By davefairtex on Thu, Aug 7, 2014 - 1:01am

Gold closed up +17.30 to 1306.90 on heavy volume, while silver was up +0.26 to 20.05 also on heavy volume.  Today's rally pushed gold back above all three of its moving averages and broke out of its current downtrend; silver's move higher, while equal in percentage to gold, was not enough to recover from yesterday's drop.

Gold's breakout started at around 0811 EDT, steadily moving higher and repeatedly stopping out the shorts until it reached its day high of 1311 at around 1030.  Silver followed, but did not look nearly as strong.  This was gold's show today, and we can see from the price chart below how gold was able to erase 9 days of general down trending action with today's move.  Gold still needs to close above 1315 to break the "lower highs" downtrend pattern, but it has taken the first step by breaking above the downtrend line.

You can see how much lamer silver's rally was than gold.  Unlike gold, it didn't rise above yesterday's high, and it remains below all three of silver's moving averages.  Amusingly, silver had a "golden cross" just yesterday, but given the big move down on that day, the news was lost in the shuffle.  Silver needs to start showing larger up-day volume than down-day volume, and as a first step silver needs to rise above yesterday's high at 20.29 before any thought can be given to a silver rebound.

The USD had a large trading range today, scoring a new intraday high for this cycle of 81.77, but then falling back to close down -0.10 to 81.50.  This was welcome news to PM; the dollar's move wasn't the proximate cause of gold's move higher, but it certainly didn't hurt.  Even though the dollar scored a higher peak today, technical indicators suggest the dollar's momentum is waning.  An RSI divergence is when price moves higher, but the peaks on the RSI indicator move lower, and it is a bearish signal indicating a possible top.

The miners gapped up at the open because of gold's early morning rally, with GDX closing up +2.26% on heavy volume, and GDXJ was up +2.64% also on heavy volume.  In spite of GDX rising less as a percentage than GDXJ, on the charts the senior miners looked healthier, moving closer to a breakout, and also rising more strongly during the trading day.   Both miner ratios have improved; GDX:$GOLD has moved back to bullish, while GDXJ:GDX is in neutral territory but is improving.  All that said, the miners did not rally as strongly as I thought they might given gold's big move higher.

SPX closed flat on the day at 1920 after making a new intraday low, trading in a relatively modest trading range.  SPX is still trying to find a low.  It needs a close above 1928 (today's high) to confirm a possible bounce.  VIX remains elevated at 16.37.  So far, all the technical indicators I follow or read suggest any rally in SPX is likely to be sold, rather than resulting in a new high.  One milestone: the 20 EMA has just crossed the 50 MA to the downside.  The last time this happened was during a brief dip back in January 2014.

Peripheral equity markets in Europe have done quite poorly this quarter; Italy and Greece down 11%, Ireland down 12%, Austria down 13%, while Portugal is off 28%.  The PIGS are back, but now include Austria, at least from an equity market standpoint.

Long term treasuries (TLT) closed flat today; bond futures had moved higher prior to the open, but were sold for most of the day.

Crude oil continued lower, with WTIC off -0.64 to 96.84, while Brent was only down -0.02 to 104.59.

Commodities overall may have put in a low - they rallied +0.83% off yesterday's cycle low.



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