PM Daily Market Commentary - 2/17/2015

davefairtex
By davefairtex on Wed, Feb 18, 2015 - 12:43am

Gold was hit hard, dropping -18.70 on heavy volume.  Silver was crushed, falling -0.85 [-4.91%] on very heavy volume.  Silver led gold on the way down, driving first below its 50 MA and then through 16.50 support, making a new low for this cycle.  Silver started selling off in Asia and picked up speed in London, culminating in a big spike lower just before the NY open, after which it basically traded sideways into the close.

Silver's move did not seem to be tied to any particular news event; shorts just repeatedly pounded the market; there was some modest buy-side support at 16.80 (silver's 50 MA) but that was only good for about 3 hours.  On the daily chart, silver's impressive breakout last Friday is now seen as a head-fake, and the primary short term trend is once again down.  The massive volume says a whole lot of long liquidation took place, probably on the break of 16.50 support.  Losing the 50 MA support was bad news for silver, and it looks to be headed to test support at 15.50.  Silver must bounce prior to 15.50 to keep its medium term uptrend alive.

The reason I say "gold followed silver lower" was because intraday, gold seemed to hold up a lot better, and it appeared that silver made new lows slightly earlier than gold - the big drop in silver happened at 0915 EST in silver, and then the same thing happened at 0916 EST for gold.  It was only one minute later, but that's enough to tell me that gold was the follower.

I must confess, I am perplexed by the big move lower in silver.  It doesn't make too much sense given how everything else seemed to be working up until now.

The dollar retreated slightly today, dropping -0.12 to 94.11.  The dollar has been chopping sideways in a trading range for about three weeks now - it did much the same thing back in October last year.  My sense is, the Syriza election in Greece has been a "sell the news" event, although the selling in the buck has been relatively mild.  That mildness suggests the uptrend in the dollar remains in place.

Mining shares sold off today, with GDX dropping -3.25% on moderate volume while GDXJ fell -3.15% on moderately light volume.  Mining shares did relatively well, all things considering, even though the senior miners made new lows for the cycle and appear to be headed for a test of support at their 50 MA.  During this gold downtrend, miners have not been hit the way they have in past moves lower in gold, which I think is mildly positive.  At least, its not horribly negative the way it was in gold corrections past.  However, that doesn't change the fact that PM is still correcting and shows no signs of reversing just yet.

SPX had a narrow trading range today, closing up +3.35 to a new all time closing high of 2100.34.  Woohoo!  VIX also rose +1.11 to 15.80.

Long bond ETF TLT sold off hard, falling -1.51%, continuing lower after breaking below the 50 MA last Friday.  The pace on this bond correction has started to get more serious; bonds are now down about 11% off the highs.  The continued selling in US long bonds suggests an unwinding safe haven/risk-on trade to me.

The CRB (commodity index) dropped -0.17%; CRB was down early in the day because oil sold off early, but as oil recovered, so did the CRB.  CRB is right up against its 50 MA.  A crossing of the 50 MA would be an important bullish milestone for the commodity rebound.

WTIC rose +0.57 to 53.24, moving above its 50 MA for the first time since July 2014.  Oil sold off prior to market open in NY but found support at its EMA-9 and then rallied steadily right after the NY open through the afternoon, finally closing above the 50 MA, and dragging oil equities right along with it.

The markets do not seem to be worried about the Greek situation at all right now.  Reading the tea leaves, there was a great deal of nervousness coming into the Syriza election victory and immediately afterwards, but after Jan 30/Feb 1, things calmed way down.  I am not sure what happened around those two days, but the USD was sold, as was the US long bond, SPX made its low, as did oil and the commodity index.  Since then, all those trends have remained in place and the sense I'm getting is one of "risk on".

Do the markets know something we don't?  The tea leaves signal that this particular crisis will be worked out, at least in the medium term.  This is hard to imagine given the statements of both Germany and Greece, but I'm not one of the well-connected so what do I know?  I do not think that the markets are the fount of wisdom, but I do believe they represent a valid aggregate sense of "current thinking" with whatever errors that comes with.  Right now I'd call it A Continuing Belief in Central Planning.  The trend for a long time now is that everything possibly bad will be eventually bailed out, regardless of how dicey things look in the interim.  And all the signals given off by Syriza is that they want to negotiate, contrary to what they were saying during the Greek election.

At some point this will end quite badly when the first bailout doesn't happen.  I'm not sure that time has yet arrived, however.  The Greek "can" could be kicked quite handily down the road for another six months using only 11 billion euros.  Will the the Greeks and the Eurogroup blow things up over 11 billion Euros?  Market, betting on the trend over the past 7 years, says "no".

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1 Comment

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Had to Post This Somewhere....

http://news.yahoo.com/swiss-prosecutor-orders-search-hsbc-money-launderi...

Even though nothing may come of this.....was a great read.

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