PM Daily Market Commentary - 2/26/2015

davefairtex
By davefairtex on Fri, Feb 27, 2015 - 4:42am

Gold rose +5.60 to 1209.60 on moderate volume, while silver rose +0.02 to 16.53 on moderate volume.  PM rallied nicely in Asia and London trading, only to sell off sharply after the dollar started a very strong rally, with the primary surge in the buck happening after 0830 EST - the time that Durable Goods, Jobless Claims and CPI hit the wires.

CPI-inflation is now negative: -0.2% annualized.  Likely, that's just about energy.

Once again, PM tried to rally only to run into heavy selling - this time probably because of the huge dollar rally.  Again, we have a shooting star print by gold.  Silver printed a gravestone doji.  Both of these represent failed rallies.  I'll show you silver because it looks so horrid.  Every time I see silver or gold do this, lower prices usually follow.  Hopefully that's not true this time.  But if the buck keeps rising, that will probably keep a lid on gold prices.

Mining shares rallied today, with GDX up +0.82% on light volume, while GDXJ climbed +0.76% on light volume also.  Both miner ETFs managed to rise above their 9 EMA, which is a bullish sign, although this rally feels like it is in slow motion.  Perhaps that's partially due to the low volume.  Buying appears lackluster.  Low volume rallies do not make me feel confident about their longevity.

The USD had a really massive rally today, climbing +1.12 [+1.19%] to 95.35, breaking above a number of previous highs in the recent consolidation pattern.  The move came primarily at the expense of the Euro, which fell -1.65 dropping to 111.99, not far from the previous low of 110.96 set on the Monday after Syriza won the Greek election.  At this point, the Euro looks destined to retest that low.  In addition, most of the major currencies also fell against the dollar - you can see in the matrix below that the dollar broke above its EMA 9 vs four different currencies today:

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Euro USD.EUR 1.45% 22.20% rising rising rising rising ema9 on 2015-02-23 2015-02-26
Australian Dollar USD.AUD 1.10% 14.98% rising rising rising falling ema9 on 2015-02-26 2015-02-26
Pound Sterling USD.GBP 0.75% 8.17% rising falling rising falling ema9 on 2015-02-26 2015-02-26
Canadian Dollar USD.CAD 0.56% 12.40% rising rising rising rising ema9 on 2015-02-26 2015-02-26
Japanese Yen USD.JPY 0.48% 16.64% rising falling rising falling ema9 on 2015-02-26 2015-02-26
Swiss Franc USD.CHF 0.43% 7.00% rising falling rising falling ma50 on 2015-02-23 2015-02-26
Chinese Yuan USD.CNY 0.00% 2.17% rising rising rising rising ema9 on 2015-02-25 2015-02-26
Indian Rupee USD.INR -0.21% -0.71% falling falling rising falling ema9 on 2015-02-24 2015-02-26
Russian Ruble USD.RUB -0.44% 69.57% falling falling rising falling ema9 on 2015-02-24 2015-02-26

US equities (SPX) dropped -3.12, closing at 2110.74, dropping not quite far enough to mark a swing high.  Surprisingly, equities did not benefit from the move higher in the buck.  VIX rose +0.07 to 13.91.

Long bond ETF TLT did not like the move higher in the dollar - it sold off sharply, down a big -1.37% and plunging through both the 9 EMA and the 50 MA in one go.  TLT did not benefit from the rise in the buck either.

The CRB (commodity index) sold off, dropping -1.34% and making a new closing low for this cycle.  It remains below all 3 moving averages.  For the index overall, it feels to me like a currency-related move.

WTIC was hit hard, dropping -2.11 [-4.13%] to 48.92, pushing oil once again back both moving averages.  While bullish and bearish days seem to be alternating back and forth, oil appears to be slowly chopping lower.  I can't exactly blame the strong dollar for today's sell off in oil.  I'm sure the strong buck didn't help, but oil just steadily sold off all day long.

I must confess to being a bit stumped today.  The Euro plummets, the buck rises, but US asset classes don't benefit.  In fact, bonds sell off.  So where did the money go?   And will it stay there, or will it eventually reappear and push US asset prices higher?

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