PM Daily Market Commentary - 9/3/2014

davefairtex
By davefairtex on Thu, Sep 4, 2014 - 5:05am

Gold closed up +3.50 on moderate volume, while silver was up +0.02 on light volume.  Rebounds in both metals after yesterday's large move down were very modest, and volume was generally light.  If you are a PM bull, this is not what you want to see: tepid buying interest after a large drop in price.  It is better than a further drop in price, but not all that much better.  It definitely does not signal a change in trend.

The dollar took a rest today, dropping -0.14 to close at 82.87.  Looking at momentum indicators, it is possible that the speed of the dollar's ascent is slowing down a bit, but that's about the only dollar-negative thing I can say at this point.  The euro does not look even slightly bullish.  It is just very oversold.

GDX fell -0.11% on light volume, while the junior miners in GDXJ were up +0.52% on moderate volume.  Miners look to be taking their cue from the metal, which at the moment do not appear to have hit bottom.  Miners remain above support but the price action is slowly getting weaker, and the path of least resistance is a break lower.

Oil had a fantastic day today, with Brent regaining all of what it lost yesterday and a little bit more, closing up +2.43 to close at 102.77.  WTIC wasn't quite as strong but still had a good day closing up +1.83 to 95.08.  The big rebound in Brent surprised me, and if it continues it should help drag commodities higher again, helping PM.  Oil is just one factor, however; commodities overall dropped another -0.54%.

Let's do a compare-and-contrast on oil vs gold.

Brent: Buyers showed up in force to buy the dip in crude.  All those new shorts who "bought the breakdown" had to run for cover, and yesterday's picture (a breakdown on high volume) has completely flipped today.  A close above today's high in Brent will signal a likely move higher.  (There was a strongly bullish-oil piece that came out on Bloomberg yesterday; curious timing I must say: http://www.bloomberg.com/news/2014-09-03/trader-who-scored-100-million-payday-bets-shale-is-dud.html.)

Gold: when you look at the gold chart, what do you see?  A very modest bounce, on low volume.  Does that look as bullish as the oil chart?  No, it doesn't.  My sense: if we get another low volume rally, the shorts will most likely wait for a few days for the price to climb a bit higher, and when that rally peters out, they will pounce just like they did yesterday and push the metal down through support again.  They'll "rinse, repeat"  until the buyers show up in volume similar to how they did in Brent today.

Just for the record, I agree with Mr Hall (the oil bull from the story) and his predictions, and his position, and I'm guessing if you read it, you will too.  I just found the timing of the whole thing quite curious.  How often do you get YOUR position and case for your trade laid out with such a positive spin on it as a headline article on Bloomberg?  And how, pray tell, might that all have come about?  Was it all some fantastic investigative reporting job by our intrepid reporters at Bloomie who sniffed this one out and extracted the story out of the unwilling participants like Woodward & Bernstein did with Watergate?  I'm guessing no.  "The story found the reporter."  Presto, a $2.43 rise in the price of crude that same day.

SPX made a new intraday high but failed to hold it, closing off -2 to 2000.72.  SPX futures were up in London trading almost 10 points and opened high, but then just sold off for the rest of the day.  VIX was mostly unchanged, up +0.11 to 12.36.

Long term treasuries (TLT) recovered somewhat from their drubbing yesterday, closing up +0.56% and bouncing off their 20 EMA once again.

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1 Comment

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5464
ECB drops rates, prints money - euro hammered

These are the kind of punchy, accurate headlines that I'd like to see someday.  Of course, we won't get anything like that.  Instead we get:

http://www.bloomberg.com/news/2014-09-04/draghi-says-ecb-readying-sizable-abs-purchases-after-rate-cut.html

The buck screamed higher today as traders fled the Euro after the ECB decided to buy an unspecified number of "simple and transparent securities" while dropping deposit rates to -0.2%.  Presumably this will encourage banks to run out and find borrowers "in the real economy" even if said potential borrowers don't actually need money to expand in an economy where people are out of work or paying down debt - the normal and logical behaviors following a debt bubble pop.

"But hey, we're going to double down on stuff that doesn't work in an attempt to blow an even larger debt bubble that will somehow fix the debt bubble we just had."  I.e. more alcohol for that guy with liver disease.

I keep wondering if "the real plan" is in the back room somewhere.

Did I mention the buck screamed higher?  Right now its up +0.88%, one of the largest one-day moves I've seen in a long time.  This, following a multi-month move higher is really quite amazing.

So far gold is managing to hang on to 1270, which is quite a feat given how well the buck did.  SPX has broken out again, US treasury bonds are having a bad day.  Lots of money is in motion...

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