PM Daily Market Commentary - 10/14/2014

By davefairtex on Tue, Oct 14, 2014 - 6:26pm

Gold closed down -4.50 to 1232.40 on moderate volume, while silver was off -0.11 to 17.38 on light volume.  From the perspective of the gold priced in USD, gold took a rest today, selling off modestly on relatively light volume.  The dollar's move higher probably didn't help, but trading wasn't particularly eventful today.

The dollar rose briskly, closing up +0.39 to 85.92 virtually erasing the losses of yesterday.  The buck has been chopping sideways since the big sell-off two weeks ago, trying to determine which way it will go next.  Most of the other currencies were off strongly vs the dollar: Euro -0.77%, Pound -1.14% (and a new cycle low), AUD -0.63%, CAD -0.84% (and a new cycle low here too).  Most of the other currencies are looking pretty weak, and that's keeping the dollar elevated.

Mining shares bifurcated today; both miner ETFs opened higher, rallied during the day, and then sold off by end of day.  GDX was up +1.18% on moderate volume, while GDXJ was down -0.15% on light volume.  It was not an eventful day - just another example of a failed rally in the mining shares.

SPX was more exciting - it tried rallying and was up +24 at one point, but ultimately it too failed to hold on to its gains, selling off into the close, up a very modest +2.96 to 1877.70.  Unlike the miners, the volume was quite heavy on the failed rally.  It looks like traders used the intraday rally as a chance to liquidate and/or go short.  VIX dropped, off -1.85 to 22.79.  It is still quite elevated, at least compared to the complacency we had a few short months ago.  We probably still have lower to go for SPX on this leg down.

Long term treasuries (TLT) rallied on the afternoon SPX selloff, closing up +0.65%.  TLT is up 21.5% on the year.  SPX by comparison is up +1.5%.  I'm wondering what bonds will do if SPX really starts to sell off.  After all, we're only down 7% from the highs.

Commodities were off slightly, closing down -0.08%.  Oil - another day, another big move down.  WTIC was off -2.70 [-3.18%] to 82.27 on massive volume, marking a new cycle low once again, touching 81.42 before bouncing back.  Brent was off an almost-as-big -2.62 to 86.05, it too making a new low.  I'd talk about oil capitulating, but I'm not sure we're there yet.  Every bit of news these days is interpreted as being bad for oil, and so oil continues to sell off with each bit of news.  Once oil stops dropping on bad news, then perhaps that will be the low.  Next support is 77.50.

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