PM Daily Market Commentary - 3/25/2015

By davefairtex on Thu, Mar 26, 2015 - 2:39am

Gold rose +2.10 to 1194.60 on moderately heavy volume, while silver was up just +0.01 to 16.95 on moderately light volume.  Both gold and silver made new highs today, with gold hitting 1199.30 but neither metal was able to hold onto its gains.  If gold can rally above 1200 and close there, it will be a bullish sign.  Likely, that depends on what happens with the dollar.

Today marks the sixth straight up-day for gold.  Spoiled yet?

Miners sold off today, with GDX down -1.43% on light volume, while GDXJ dropped -1.33% on light volume also.  Senior miners printed a bearish engulfing candle, which could mark the top of the rally for the miners.  If the dollar ends its correction soon, miners likely fall from here.  If not, this will just end up being the pause that refreshes.  GDX still remains above its 9 EMA, which says the short term uptrend remains intact.

The dollar fell, dropping -0.25 to close at 97.20.  The buck seems to be finding support when prices drop below 97; on the other side of the pond, the Euro seems to have trouble moving above 110.  As always, what happens next with the dollar is probably the key to PM and commodities.  Notice: the dollar drop has slowed dramatically, and so has the rally in gold.  Right now, the two instruments appear to be tightly linked.

SPX dropped strongly today, falling -30.45 to 2061.05.  The market sold off pretty much all day long, and it closed quite near the lows of the day.  Coming after the swing high marked yesterday, the moderately heavy selling day as follow-through is a sign that traders are more worried about keeping gains than they are about missing out on the next rally.

There is a lower high in the process of being formed; it will be confirmed on a close below 2030.  If that happens, its a reasonably big deal.  A chunk of disciplined traders will sell at that point.  The only question is, will buyers emerge to buy the dip yet again, and how long will they take to appear.  If they don't show up relatively soon after 2030 is broken (and I believe it will be broken based on today's action), things could get ugly very quickly.  Traders are primed to exit "as soon as we have a top."  What the magic trigger for that is, nobody really knows.  It could be a price level that cracks, or it could be an unexpectedly bad economic report, or it could simply be a very bearish day.  But my sense is, once traders believe a top is likely in, the stampede for the exits will be legendary - and this will lead directly to a no-bid flash crash.

VIX shot higher today, rising +1.82 to 15.44.

SPX factoid: market is up +0.1% on the year.

Curiously, bond ETF TLT fell today, dropping -0.84%, printing a bearish engulfing candle.  I would have expected TLT to rise after a decent-sized move down in equities.  I believe the fact that it didn't may be a warning sign for US treasury bond-holders.

The CRB (commodity index) rose +0.76%, steadily moving towards its 50 MA.  Commodity index is still quite bearish, but it is slowly improving.

WTIC had a good day, moving up +1.28 [+2.68%] to 48.97, climbing back above its 50 MA for the first time in three weeks.  This, after the 1030 EDT Petroleum Status report indicated another large 8.2 million barrel build in oil inventories.  For all the news coverage of storage issues, the market doesn't seem to care: WTIC dropped right at 1030, but then promptly rallied, making back all the losses and then some.

SPX has my full attention right now.  I believe we will see the lower high confirmed.  What happens after that is key.  Will money rotate out of equities into commodities?  Gold?  Treasury bonds?  Or will it buy the dip as it has every time in the past four years?

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