PM Daily Market Commentary - 12/16/2014

By davefairtex on Tue, Dec 16, 2014 - 8:16pm

Gold had a wild day today, making a new low, rising almost to yesterday's high, and then losing most of its gains, closing up just +1.50 to 1195.30 on very heavy volume.  Silver did less well, following gold but eventually closing down -0.47 to 15.72 on heavy volume.  Today moves seemed closely linked to the USD, with the turning points in gold and silver coinciding with the highs and lows of the buck.

FOMC meeting ends tomorrow with a press conference at 1430.  The big mystery is what the Fed will say about oil prices.  I expect some significant volatility.

The dollar dropped -0.59 to close at 88.11.  It had corrected even more dramatically than that (at one point, it hit 87.83) but it managed to bounce back.  Since the large drop in the buck today didn't result in a move higher in gold, that suggests gold is selling off in other currencies, and if we look at the charts, that is what we see.  Gold in Yen is doing particularly poorly, having lost half its recent gains over the past week.

The dollar still looks to be putting in a top; it is now through its EMA-9 again and if it can close below 88 perhaps the move lower in the buck can be sustained.  One wonders what the buck will do post FOMC press conference.  If recent history is any judge, the dollar will rally strongly, encouraged by some talk about happy economic performance, or about rate increases, etc.  If that doesn't happen, perhaps we will see a trend change.

USD/RUB had a crazy day with an immense trading range - first dropping below 60, and then rising to 78.41 (!) and finally closing at 67.67 up +5.88% on the day.  These are just ridiculous moves for a currency of one of our larger nations to be having.  If oil can rally or even slow down its descent, that should help the Ruble.  These sorts of moves have to be causing chaos to any Russian business that have loans denominated in dollars.

Mining shares continued the string of bad days, with GDX closing down -1.38% on moderately heavy volume, while GDXJ dropped -2.67% on moderate volume - another new all time low for GDXJ.  When will the beatings of the mining shares cease?  Traders just aren't interested in buying.  The price charts look bad, the ratios look bad (new all-time lows in the ratios every day now), there is not much more to say.  This reminds me a whole lot of 2013, where mining shares just went down every day.  As I recall, the beatings stopped towards the end of December, after tax loss selling abated and the GDX:$GOLD ratio started to move higher.

Bonds screamed higher today, up a big +1.24% scoring a new yearly closing high.  TLT is now up +27% this year - just imagine what that looks like in foreign currency terms.  Yield on that 20 year bond is 2.4%.  I suppose that ends up being a 25% capital gain, and a 2.4% yield.  JNK ignored its doji from yesterday and continued dropping, off -0.74%.

SPX had a big trading range, first making a new low in the futures markets before market open, then rallying strongly up +30 mid-day, only to sell off hard into the close.  That's another failed rally for SPX - and we know, failed rallies tend to be bearish.  SPX closed down -16.89 to 1972.40.  Volume is continuing to pick up each day.  All the volatility made the VIX go nuts, rising +3.15 to 23.57.

Commodities continued falling, down a big -0.92%.  The commodity picture is just screaming deflation; the commodity index is down 24% since April 2014, and the commodity index price chart keeps making new lows every day.

WTIC actually did well for a change, first making new lows and then rallying back to close slightly above even, +0.10 to 55.51.  WTIC printed a doji on high volume, which is the first half of a reversal signal.  If WTIC can manage to close above around 57.30, we may see a reversal in oil prices.  That's a big if; if you recall, the last possible reversal signal from Dec 1 was not confirmed.

I'm hoping that if oil can put in a low, perhaps the rest of the oversold commodity complex will stabilize - which should help silver.

Lots of volatility right now, what a perfect time for an FOMC meeting to inject even more volatility.  Gold's uptrend is still in place, so is silver's (although it is looking distinctly weaker), while senior and junior miners look weak and weaker.  Market action following tomorrow's press conference should be interesting.

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