PM Daily Market Commentary - 12/31/2014

davefairtex
By davefairtex on Thu, Jan 1, 2015 - 4:09am

Gold dropped -17.10 to 1183.20 on light volume, while silver dropped a big -0.67 to 15.60 but also on light volume.  Both metals sold off for most of the day, the selling accelerated after the NY open, and both gold and silver closed near the lows.  Gold lost all its gains from yesterday, while silver did much worse.

There was a great deal of volatility in many markets today.  It looked to me that various participants were working hard to move prices on all sorts of things in various directions; perhaps important derivatives are priced based on end of year (end of month, or end of quarter) closing values, and so stuff was bought or sold in sufficient quantity to move prices around to where they "needed" to end up so that traders at the various FDIC-insured gambling institutions could improve their bonuses.  Overall trading volume was light, so this was easier to accomplish than it normally would have been.

The buck ended 2014 on a high, closing up +0.33 to 90.62.  The dollar is up 13% since June.  Dollar strength is a popular theme to read about these days, and the buck continues to rise on any positive news at all from the US.  On the other side of the equation, the Euro made a new low, closing down -0.49% to 120.97.

I have noticed that, once in place, currency trends tend to stay in place for quite a while.  We might just have another six months to a year of the dollar moving higher.  All my macro indicators show that deflation trends (defined in this case by declining loans outstanding) have been in place in the Eurozone since mid-2012.  So far, Dragi's well publicized "printing operation" has been all hat, and no cattle.

In spite of gold's drop, miners did relatively well; GDX was down only -0.38% on light volume, and GDXJ dropped -0.79%, also on light volume.  SIL, the silver miner ETF, actually rose an astonishing +1.20% - astonishing because the underlying metal dropped a massive -4.12%!  The relative outperformance of the mining shares caused the ratios to jump higher; GDX:$GOLD is closing on its 50 MA, and SIL:$SILVER gapped higher and is now well above its own 50 MA.  These are bullish indicators on a day when PM (and especially silver) was pummeled.

SPX was hit moderately hard today, dropping -21.45 to close at 20.58.  The VIX screamed higher, up +3.28 to 19.20.  The curious drop in SPX right at end of year alongside the clear desire of traders to load up on put protection might presage some difficulty for equities in the new year.  This recent SPX up-cycle hasn't been going for long - a sell off starting this early in the current SPX cycle suggests a deeper correction may be on the way.   It is possible that the January Effect was front-run, and now profits are being taken before January even arrives!

TLT moved modestly higher, up +0.19%.  With the rise in the buck and the drop in SPX, one might have expected TLT to do better.  JNK sold off, down -0.44%, dropping right along with SPX.

The overall commodity index ($CRB) ended a bad year for commodities by closing down -1.51%, a fairly large move down.  Oil had a volatile day, but due to some dramatic last-15-minute moves, WTIC closed down just -0.20 to 53.71 after hitting new lows and being down almost $1.50 (to $52.40) earlier in the day.  WTIC printed a doji, which is a reversal candle; I'd be more excited, but I've seen a number of reversal candles for WTIC and none of them have led (yet) to a rebound in oil.  We need a WTIC close above 55.35 (the EMA-9) to even suggest an improvement.

Martin Armstrong's computer and the end-of-year closing prices are predicting the following:

* Close of 1183.20: Gold remains in a bearish mode, but did not elect the extremely bearish option which would have seen it test $1000.  Gold likely makes a new low in 2015.

* Close of $53.71: Oil elected the extremely bearish route, resulting in new lows ahead for oil, large amounts of deflation in the oil patch, knock-on effects to emerging market oil producer debt (and related CDS), and a possible test of $32 as ultimate support.

* Close of $1.2097: Euro elected its extremely bearish route too, which signals that the Euro is moving into a meltdown mode.  A close below $1.16 signals a retest of par.  Implications of this: continued strength in the buck, and possibly continued strength in US equities - maybe even a Phase Transition.  One cause is a possible Greek exit, followed by a sovereign debt crisis, which would drive capital from government bonds into the private marketplace.

Over the past four trading days, gold has been a roller-coaster ride - up strongly one day, and down just as strongly the next.  Moving averages remind us that the current trend remains down, but the recent gold mining share outperformance hints of a possible recovery coming in 2015.  Will gold follow the miners hints upward?  I think the odds are, it probably will, and weakness in the equity market should help too.

If Armstrong's computer is correct and the close below $57 means that oil will continue dropping, that will be hard on silver and commodities overall.  Gold likely benefits from troubles in the Eurozone.  The stronger the meltdown and the more imminent a Grexit seems to be, the more enthusiastic both central banks and people will be to have either gold or dollars as a place to hide from the storm.

Next year: I expect to see more repatriations, and a tighter gold leasing market.  If this manifests in the physical market, we can track that to some degree using Shanghai premiums as well as the outflows from the physical delivery ETFs.

2015 should be an interesting year!

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8 Comments

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
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Posts: 233
KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 653
Many YEAR's THANKS to Dave

All year long you have been quite a support to us at PP.com and I really want to express my gratitude for ALL that you do.  I really enjoyed your analyses and even prognostications, especially the contact introduced to Armstrong. 

I'm been very disappointed and frustrated.  Lost money in the market with .com and 2008 bubbles and even NOW with losing out on the 30% GAINS in the market last year.  What's a guy to do?  Who to listen to anymore?  I try to do as much on my own as possible but have realized how COMPLEX the markets/political interrelationship/global elites is.  Having finished Griffin, Prins and now Quigley's books, I tend to lean in one direction but still overall very doubtful.  So, you are a breath of fresh air.  Thanks.  Ken

May 2015 bring some enlightenment to all this!

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
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Posts: 653
What's a guy to do?

Here's one possible excellent analysis.

15 Surprises for 2015
John Mauldin | Dec 31, 2014
with actual recommendations.
ebmoore's picture
ebmoore
Status: Member (Offline)
Joined: Aug 28 2011
Posts: 2
2014 Review and thoughts on the future

I agree with your frustration regarding the markets and our economy in general.  I believe that there really isn't a place to park your money without speculating and risking  a majority of your capital.   This goes for stocks, bonds, precious metals, etc.  I value the insight and views of Martenson, Puplava, Mauldin, Turk, etc., but my belief is we're going to be slowly robbed of our assets no matter how we plan for the future.  Should a black swan event happen in the near future as Chris M has predicted for sometime now and gold/silver start to rocket up, my bet is our wonderful government establishment will penalize us for holding precious metals.  We live in an age where stupidity, recklessness and greed are rewarded.  I have a former friend that filed for bankruptcy this past year.  Him and his wife make approximately $150k per year salary and shed $150,000 of credit card debt this year.  They celebrated their bankruptcy closing by flying to Napa Valley for a wine tasting festival.  Christ, what's the point to being responsible any longer when you hear sh!t like this.  

Wildlife Tracker's picture
Wildlife Tracker
Status: Gold Member (Offline)
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Posts: 403
Making money is EASY

Just trust in the financial deity

All you need is to inherit 60 million and only lose 80% of it

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1982
Trump correlation

I can and have predicted  recessions by when Trump comes out with a new "get rich" book. Davefairtex might even want to do a chart. It's  a very close correlation . . .

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
A Bit Rich

I have read the book "How to Be Rich"

I miss-read the title.

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 772
I don't consider the

I don't consider the 'surprises' too much of an analysis. Rather, he's trying to find some contrarian positions worthy of consideration. As such, 30% is an excellent success rate.

However, it is not to invest on.

Now, as to the original positions, I consider him highly preemptive on the stock fall/gold rise. I rather expect that the candidate choice will be clarified as Bush/Clinton, and on that news, stocks will wildly rise and pressure will ease on central banks, because -- in fact -- Bush /Clinton is another election without any choice.

That said, if Gold does rise and markets crash this year, it will be quite late in the year. I just don't expect it.

I do expect wheat prices could rise the way he said, and I expect that if it happens, it will precipitate at least two or three governments to fall, worldwide, some violently. The Arab Spring will repeat.

His Apple bet is probabny on target, except for one thing: watch out for the next huge thing to be hyped as great, initially, but then to be panned as actual trash. That COULD cause the one trillion prediction to fail, but probably won't.

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