PM Daily Market Commentary - 10/16/2014

By davefairtex on Thu, Oct 16, 2014 - 6:23pm

Gold closed down -2.20 to 1239.10 on heavy volume; silver was off -0.09 to 17.35 on moderate volume.  Gold tracked mostly sideways today as did silver, with silver looking weaker than gold overall.  I'm not sure where gold's heavy volume came from - the trading day looked pretty uneventful.

The dollar tried to rally today but failed, closing down -0.04 to 85.04.  If your favorite thesis is that the Eurozone is about to explode on the backs of a Greek default (and this makes sense if you look at the big pop in Greek bond yields over the past week), there is no apparent flight to safety to the buck, so I'm not sure if the currency market believes in the default story just yet.  Perhaps this is just a "Greece only" event for now.

In what is becoming a familiar routine, mining shares rallied for the first half of the day, but then sold off in the afternoon, with GDX closing down -0.42% on moderate volume, and GDXJ up +0.64 on light volume.  It looks like mining shares need some sort of catalyst to get them to move in one direction or another.

SPX traded lower in Asia and London, bouncing off of yesterday's low before the positive INDPRO release at 0915 seemed to encourage the market higher, enabling SPX to rally back to even by end of day.  SPX closed up just a hair, +0.27 to 1862.76.  VIX retreated -1.05 to 25.20 - still quite elevated.  Market appears undecided about direction right now.

Russell 2000 had a very nice rally today, up +1.27% and closing above its EMA-9 - possibly signaling a return to risk on.

Long term treasuries (TLT) sold off today after the crazy day yesterday, closing down -0.64% seemingly confirming the top in bonds.  JNK recovered, moving up +0.66% - a big move for JNK, and suggestive of a possible return to risk on.

Commodities were up +0.44%, a decent move.  WTIC made a new low to 79.78 before rallying strongly, stopping out a whole bunch of shorts and closing up +1.99 to 83.08.  Brent didn't look quite as good but still rallied up +1.70 to 85.82.  Oil equities gave us the signal yesterday, and oil followed through today.  An oil services ETF I watch has had some huge volumes over the past week.  Large volume and a big red candle is a bad sign, but if it is followed up by a bunch of sideways action also on huge volume, that's a sign of accumulation by big money.  This high volume price action reminds me of the 2008 lows.

While the miners appear listless and seem to have every low volume rally stuffed by end of day, the excitement seems to be in oil right now.  Massive volume is our clue that Something Interesting might be up.  If you bought oil services equities in July, you just lost 30% of your capital.  After three months of pain, perhaps all the dreadful news has you ready to capitulate...into the hands of the big money.

Overall, market seems to be hinting at a return to risk on.  Bonds selling off, JNK rallying, small caps rallying, commodities up, and perhaps a low in oil (signaled by our friendly oil equities) all together paint this picture.  It needs confirmation by an SPX close above 1880, but I'd say if no big bad news event intervenes, that's more likely to happen than not.

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1 Comment

KugsCheese's picture
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469

The plumbers have been in the market, especially the SP500 Futures, much this week.  They will do everything to prop it up until the midterms.  But the more volatility there is over time the more persons want to sell. 

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