PM Daily Market Commentary - 11/10/2014

davefairtex
By davefairtex on Mon, Nov 10, 2014 - 6:32pm

Gold fell -27.30 to close at 1151.40 on heavy volume, while silver dropped -0.22 to 15.59 on moderately heavy volume.  Metals were trading sideways until about 0600 EST when the dollar hit its intraday low and started to rally.   PM didn't like this, and both gold and silver started dropping steadily ... and they just didn't stop dropping until the NY market close.

Gold lost a big chunk of the gains from Friday's big rally.  Volume was heavy, although not as heavy as the rally on Friday.  It is a somewhat concerning outcome since it shows that there aren't enough buyers at COMEX to immediately push prices higher, however as long as prices stay above 1130 the case for a rebound remains alive.

Silver on the other hand had a relatively mild sell-off; it lost a much smaller percentage of its Friday gains, and volume was moderate.  Buyers still need to show up and push prices over the EMA-9, but to my mind, today's mild retracement for silver is a reasonably bullish outcome, especially compared to gold.

The buck had a fairly large trading range today - it dropped about 0.30 during Asia and London trading, and then rallied steadily for the rest of the day, eventually closing +0.17 to 87.89.  As mentioned, PM didn't like the dollar rally at all.  If the dollar ends up making new highs, it will probably be trouble for gold.

Mining shares were crushed today, with GDX dropping -6.38% on very heavy volume; GDXJ was down -7.14% also on very heavy volume.  Both mining ETFs opened lower, and sold off for most of the day.  As with gold, much of the gains from Friday were wiped out by today's drop.

Neither gold, nor the miners have been very kind to "buy the breakout" trades - anyone buying the breakout Friday is underwater by end of day today.  The massive volume for the past two weeks shows that a large number of shares are changing hands, which I interpret as a largely positive sign.  Still, losing most of Friday's gains is just no fun.  Miners sure aren't making it easy.  A close below the consolidation low will likely result in another avalanche of selling, but as of right now the reversal trade is still in play.

There are several different types of "bottoms" during reversals.  In some cases, the instrument hits a low point, and then immediately reverses, rocketing higher day after day.  The SPX low 3 weeks ago was a great example of this.  Once the low was marked, "buy the breakout" would have been a no-stress trade where you just relax and watch the rocketship take off.

Other reversals end up being incredibly choppy, with strong up days followed by almost equally strong down days; traders buy strongly on the first day, and bail out wholesale the second day, then rush back in to buy day 3 - up, then down, then up all on high volume and with very large daily moves until the market finally decides to rise.  During these types of reversal patterns, it feels like the market really wants to shake out as many traders as possible before moving higher.  I remember this vividly during the lows in 2008.

From where we stand today, we still don't know for certain that the low in gold and silver is in.  Trading is all about judging when to take risk under conditions of uncertainty.  The idea is, take risk only when the odds in your favor.  To my mind, the the odds are in favor of a rebound off the 1130 level.  Of course, that is not a guarantee, and from what we saw today, it will not be one of those stress-free "rocket ship" lows.  One thing that could derail the low is a continuing dollar rally.  A dollar breakout to new highs may end up with gold making a new low in response, which will invalidate the rebound and likely lead to more selling.  It happens.

SPX moved higher once again, closing up +6.34 to 2038.26, yet another all time closing high.  VIX dropped -0.49 to 12.63; once again, put buyers have been eviscerated by the strength of the equity market.

The long bond ETF TLT dropped -0.92%, losing most of its gains from Friday but remaining within its consolidation range.  JNK was basically flat, up only +0.02%, also remaining within its own trading range.  No "risk on" signal from junk bonds, and the long bond looks like it is marking time waiting for the equity market to top out.  But so far, no top in sight.

Our two day commodity rally ended today, with the index down -0.78%.  In London trading, WTIC broke above its EMA-9 and looked on course to hit 80, but then the dollar started rebounding, and that eventually drove WTIC down hard; it eventually closed at the dead lows of the day, off -1.25 to 77.18.  Brent tried breaking out as well, but ended up closing down -1.30 to 82.09.  Both oil contracts remain below their respective EMA-9s.  Oil is still in a downtrend, as are commodities.

As is silver, and gold.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

4 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
And in $Aust.

How do we find out the price in $Aust? According to the Perth mint chart the silver to $Aust has leveled out.

It looks as though this just reflects the weak Australian dollar.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
price in other currencies

In stockcharts.com, enter: $SILVER:$XAD, or $GOLD:$XAD

Currencies:

  • $XAD - AUD
  • $XEU - Euro
  • $XBP - GBP
  • $XJY - JPY
  • $CAD - CAD

 

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Coin Shop Experience

Thought I would pass this along. I live in Vermont and stopped by one of the two coin dealerships in Burlington. I do business with both.  I asked for one ounce of silver and the woman behind the counter responded that she didn't have much.  When she brought out what they had, I was astonished to see that they only had four ounces left in the store.  Don't think they had any junk silver available either. When I asked her about the sales....she replied that people were buying....but that the store was not going to go out of their way to purchase anymore.  She said that they have lost a lot of money on the last two purchases they made (I didn't feel comfortable asking her at what price that had been) and that they were not going to be putting in any orders for a while.  She said they would purchase whatever came over the counter, happily, but that with the price drop it didn't make any sense for them to keep inventory.

Just wonder if other people are starting to have similar experiences. Also, just wondering about supply and demand.   Perhaps we have reached bottom and the shortage/squeeze has begun.

Jason

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
dollar lower = miners go nuts

As I write this, the buck is off -0.48% and this has spurred both metals to rise: silver +1.01% and gold +0.85%, both respectable moves.

But its the miners that are the happiest.  GDX up +5.96%, GDXJ up +8.68%.  Miners sure seem to love a dropping dollar...

GDXJ has just broken out to a new cycle high.  This tells me the rally on Friday wasn't just a one-day short covering wonder.  The lows for gold at 1130 look substantially more certain at this point, as does the miner rebound.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments