PM Daily Market Commentary - 10/6/2014

By davefairtex on Tue, Oct 7, 2014 - 3:43am

Gold closed up +16.20 to 1207.30 on heavy volume, while silver was up +0.49 to 17.33 on moderate volume. Right at the open in Asia, shorts tried to hammer gold through its 1179 low; the attempt failed, with gold finding support at 1183.30.  Soon after that, the dollar started to drop, and that encouraged gold to recover.  The real rally started during London trading hours, and gold steadily rose through the end of the day in NY.

Silver actually did better than gold today; up 2.91% to gold's 1.36%.  The silver chart also looks better than gold.  By the close of trading, silver had risen to touch its EMA-9 at 17.33, while gold remains $5 shy of its EMA-9 which is currently at 1211.  To me, it looks like we are poised on the edge of a big PM reversal, with silver leading the way.

The USD had a massive drop today, off -0.92 [-1.06%] to 85.89, at one point touching its EMA-9 briefly (85.79) but then rebounding.  It is on the cusp of reversing.  Dollar needs a close below 85.75 to signal a swing high.  If it does manage to do this, PM and especially silver should start rallying much more seriously.  Managed Money has a whole lot of short exposure that will need to be unwound, and this will provide fuel for the rebound.

Mining shares rallied steadily today, GDX up +2.57% on heavy volume, while GDXJ was up a much larger +4.97% on very heavy volume.  Mining shares looked moderately happy today, but the buying seemed a bit cautious.  Many, many rallies have failed over the past few months, and I got the sense that traders had their fingers burned too many times to get too excited about buying mining shares on this particular rally.  While GDX and GDXJ are both quite close to marking swing lows, they remain well below their respective EMA-9s. 

SPX had an off day, dropping -3 to 1964.82.  Early in the day, SPX tried rallying through its 50 MA but failed, and it sold off a bit towards the close.  VIX jumped +0.91 to 15.46.

Long term treasuries (TLT) were up +0.06%, mostly flat right along with SPX.  The long bond remains close to its highs, and also remains in an uptrend.  If the dollar continues dropping, TLT's future will likely depend on what happens to US equities.

Commodities staged a huge rally, closing up +1.99% on the day.  You can see the pattern - commodities really like a falling dollar.  WTIC was up too, +0.75 to 90.46, and Brent was also up +0.48 to 92.79.  In spite of the rally, the Brent chart still looks horrible and the WTIC chart doesn't look all that much better.  Can we get silver to rally with crude oil falling?  That's an interesting question.

Once again, its all about the dollar.  I can't tell you what it will do - but PM looks ready to rally if the dollar corrects.  That has been the hope for a while now, and perhaps now we are seeing it play out.

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