PM Daily Market Commentary - 12/09/2014

davefairtex
By davefairtex on Tue, Dec 9, 2014 - 8:29pm

Gold rose +28.40 to 1232.10 on very heavy volume; silver was up +0.73 to 17.10 on heavy volume.  Gold was moving sideways until right around 0720 EST when the buying started - and the buying didn't stop until 1030 after gold had broken to new highs, stopping out a bunch of shorts on repeated breakouts higher.  The only linkage I could make for the move in PM was a drop in USD around that same timeframe.

Gold today confirmed the high volume bounce off 1140 (from six days ago) today, and also closed far above its 50 MA on some really high volume - both things should bring some disciplined longer term hedge fund buyers out of the woodwork.  Silver has closed above its 50 MA for the first time since early August, a bullish milestone for it too, which moved the gold/silver ratio down -1.48 to 72.03, with the ratio closing below its own 50 MA too.  There were a large number of bullish changes in the yellow metal today - shorts have to be nervous.

Next stop for gold - close above the previous high at 1255.60, which would mark the end of the medium term downtrend.  This would be major good news, and it does not look to be too difficult to achieve.

The dollar dropped a big -0.43 today, closing at 88.72.  It was down a lot more than that at one point, touching 88.39, but it rebounded off the lows.  In spite of the decline, the buck still remains in an uptrend, managing to close just above its rising EMA-9.  Its quite an achievement for gold to be rallying in spite of the continued move higher in the buck - that tells you that gold is doing very well in many other currencies.

Mining shares were up, with GDX +4.66% on moderately heavy volume, while GDXJ rose only +3.98% on moderate volume.  GDX printed an inverted hammer candle and GDXJ printed a doji - not what you want to see when the metal makes new highs on big volume.  Mining shares look weak, there are no two ways about it; GDX just squeaked above its 50 MA today, in contrast to gold which blew through its own 50 at the very start of the day.  Hopefully the miner underperformance is just pressure from tax loss selling and/or continuing dollar strength, and not a signal of weakness in PM overall.

Bonds broke out to new highs today, up +0.51% enjoying a pop from the equity market weakness.  Junk continued its sell-off, down -0.28%.  Junk bonds are threatening to make new lows; on the daily chart things seem grim, but on the weekly JNK still seems to be quite near its highs.  Once some of those shale drillers go under, and once the market cuts them off from their flow of borrowed money, they will, it still has a long way to fall.

SPX was down for its second straight day; at one point SPX was down -27 points, but buyers showed up and pushed the market right back up to almost even.  SPX closed down -0.49 to 2059.82, printing a bullish hammer candle on the day.  VIX was up +0.68 to 14.89.  Is a two-day drop all we're going to get?  I suspect it will depend on the buck.  If money continues pouring into the US and the dollar continues rising, I don't think the US equity market will drop very far.

Commodities rebounded today, closing up +0.89% but they have not yet signaled a low.  Commodity index remains below its EMA-9.  Oil remains a disaster; after making new lows yesterday, WTIC was up +0.25 to 63.27 while Brent closed up +0.65 to 66.84.  There just aren't enough buyers of crude at these levels to stop prices from moving lower.  If there was a big battle between manipulators trying to push prices lower, and the fundamental buyers looking to back up the truck at these low prices, volume would tell us this.  I'm not seeing this play out, however, so if manipulation is happening, its not showing up in the futures markets.

Gold is doing amazingly well in the face of ever-declining oil and a weak commodity index.  Gold outperforming the commodity index has been going on for the past two weeks.  Perhaps this is signaling that something interesting is about to happen?

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