PM Daily Market Commentary - 10/13/2014

davefairtex
By davefairtex on Mon, Oct 13, 2014 - 9:05pm

Gold closed up +13.60 to 1236.90 on moderate volume, while silver was up +0.10 to 17.49 on light volume.  Gold outperformed silver, moving the gold/silver ratio up +0.36 to 70.72.  A weaker dollar helped the metals move higher today.  Gold looked especially strong, hitting a new cycle high and closing near the highs of the day.  The only fly in the ointment - the volume was somewhat light.

The dollar sold off today, closing down -0.53 to 85.53, a large move that clearly helped gold move higher.  In addition to the large move during trading hours, immediately after the US market closed the dollar slid further, touching 85.20 before rebounding slightly.  If the buck moves below the previous low at 85.00, there probably would be even more selling, which should be positive for PM.

Mining shares opened up today, rallied strongly for most of the day, and then sold off hard into the close.  GDX ended up closing +1.69% on heavy volume, while GDXJ was up +1.85% on moderately heavy volume.  As a result of the end-of-day selling, GDX and GDXJ both ended up printing almost tombstone dojis, which are the clear markers of a failed rally on the day.  From what I can tell, the sell-off in the mining shares was probably driven by the sell-off in the equity market which happened right around the same time.

SPX closed down -31.39 to 1874.74, blowing through its 200 MA on some heavy volume.  SPX sold off through its 200 MA early in the day, rallied back up to the 200 at mid-day, failed to break above it, and then sold off through end of day.  Sometimes a failure to rally through resistance leads to selling, since resistance levels are logical places for shorts to load up.  If you are looking to go short, a rally up to a moving average is a relatively low-risk place to enter.  Place your stop above resistance to take you out in case longs outnumber shorts.  Clearly, longs didn't outnumber the shorts today.  Momentum appears to be down.

The VIX spiked higher today on the move through the 200 MA, rising a huge +3.40 to 24.64.  The VIX hasn't been here since April 2012.  No more complacency, that's for sure!   Buying puts now is probably a bad idea though, they are really expensive, and its generally a low percentage move to buy this deep into a down-leg.  I'd expect a bounce within the next few days, perhaps somewhere in the 1850-1860 range.  Wait for a bounce back up to a resistance point, and then buy, if that's what you want to do.

Long term treasuries (TLT) rallied, benefitting from the drop in equity prices, closing up +0.61% and hitting a new cycle high, pushing the long bond to a 21% gain on the year.  20 year treasury bonds now yield 2.77%.  Junk on the other hand continued lower - JNK was off -0.30%.  Risk off continues to play out.

Commodities rallied, moving up +0.47%, likely moving higher because of the dollar's -0.61% drop.  However in spite of the dropping buck, WTIC fell -0.55 to 84.97, and Brent dropped a full -1.00 to 88.89.  Oil just can't seem to catch a break.  Oil-related equities were stomped really hard - an oil ETF named IEO was down a massive -4.61%.

Situation is improving for PM, largely on the back of the falling dollar.  If we could just get oil to cooperate, I think we'd see silver do really well.

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1 Comment

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2885
Just get more Phyzz

(Credit ZH)

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