PM Daily Market Commentary - 1/13/2015

davefairtex
By davefairtex on Tue, Jan 13, 2015 - 11:53pm

Gold fell -2.50 to 1230.90 on moderately heavy volume; silver rose +0.48 to 17.09 on heavy volume.  Today gold spiked up through the previous high at 1240 hitting 1244.50 during trading in Asia, but was unable to keep those gains into the close, resulting in a failed rally and an inverted hammer candle print.  Silver on the other hand had a very good day, breaking above its recent 5-day consolidation pattern, keeping most of its gains into the close.

Silver's breakout above consolidation happened early in Asia trading, but the upside assaults did not stop - they hit silver repeatedly, with half a dozen upside spikes that finally ended at 1130 in NY trading, with silver touching 17.21 as a high for the day.  The fact that silver held most of its gains into the close suggests that this might be more than just a short covering rally, and that we could have a chance at a close above 17.35, which would end silver's medium term downtrend.  The fantastic move in silver caused the gold/silver ratio to drop -2.23 to 72.02.  It is now looking substantially more bullish.

The buck rallied today, closing up +0.23 to 92.46.  The buck moved steadily higher for most of the day, and looks like it might be preparing for yet another breakout higher.  Greek elections on January 25th - just the latest reason amongst a sea of reasons for the dollar to remain strong.

Mining shares were crushed today; while they opened up briefly, they sold off hard right after the open, and continued lower for most of the day.  GDX was down -4.37% on heavy volume, while GDXJ was off a lesser -3.80% on moderately heavy volume.  GDX printed a "bearish engulfing" candle on the day, and looks like it might well have put in a top for this cycle.

Intraday, the behavior of GDX was curious - at the open, gold was still up perhaps $6 and silver was trading around $17 and change, up almost 0.50 on the day, a huge move.  Yet GDX sold off from the opening bell.  This very bearish behavior surprised me - the best I could figure is that AUY (Yamana Gold) issued a big bunch of new shares after market close yesterday, and that served notice to the rest of the senior miners that dilution was a possibility for all of them.  Given the low price of gold, miners are starting to print shares in order to stay afloat.  Here's what that share print-fest did to Yamana's share price - ouch:

SPX had a very volatile day - at first rising almost 30 points, only to lose it all and then some around mid-day, recovering some of its losses into the close.  SPX closed down -5.23 to close at 2023.03.  The excitement sent the VIX up +0.96 to 20.56.  SPX continues to look weak.

Long bond ETF TLT was unchanged on the day; it made a new high intraday when SPX sold off, but sold off into the close.  JNK closed off -0.10%. 

The overall commodity index ($CRB) continued lower, dropping -0.51%.  Part of the drop came from the dramatic collapse in copper, which dropped a huge -4.37% [-0.12] to 2.61 just today.  Copper prices haven't been here since 2009 - although the drop in copper is still mild when compared to oil.  To me, copper is about China; the chart below says China is on a steady path to buy fewer raw materials.  The news stories may talk about various stimulus packages, but Dr. Copper is telling a relatively consistent story about reduced construction - it is another deflationary puzzle piece.  Copper: down 20% since July 2014.

Oil actually rallied today, marking a new low but rebounding to close up +0.40 at 46.11, printing a doji-ish candle on very heavy volume.  This is a reversal bar and may mark a low - however since we've had five of these during oil's long downtrend, I'm not opening the champagne just yet.  Confirmation required: a close above today's high at 46.79.

Today was a very eventful day with prices moving strongly but pulling in different directions - silver was a star, copper collapsed, oil looks like it might rally (no, really!), and the mining shares were sold hard.  Sometimes the market just challenges you to make sense of it all.

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