PM Daily Market Commentary - 4/2/2015

davefairtex
By davefairtex on Fri, Apr 3, 2015 - 3:46am

Gold fell -1.20 to 1202.50 on moderate volume, while silver dropped -0.18 to 16.75 on moderate volume.  Given the drop in the buck today, it was a poor performance by PM.  There was no one event that caused the move lower in silver, it more or less just steadily sold off.  Gold more or less traded sideways in a narrow range.

The miners fell, with GDX dropping -1.15% on moderate volume, while GDXJ fell -1.62% also on moderate volume.  Miners disappointed today - I expected better given the fall in the buck.  Until GDX breaks above its previous high at 20 it remains in a downtrend, however I do have some amount of optimism based on recent volume patterns.  For GDX, the up-day volume is substantially higher than the down-day volume, at least over the past three weeks.  That's generally a bullish sign.

The dollar continued falling today, losing a big -0.80 to close at 97.67, marking another swing high which is bearish.  If confirmed by a close below about 97.20, this would form a "lower high" pattern which is the universal sign of a trend change - a bearish one.  This would signal a top in the dollar and given how extended the buck is, the selling pressure will increase.  Europe is by no means out of the woods on Greece, but the USD has been a one-way trade for months now.  It is still extremely overbought.  I still believe we will have higher highs in the buck - but just perhaps, not yet.

SPX managed to rally today, rising +7.27 to 2066.96, with all the buying happening within the first 30 minutes of trading.  However the move higher ran into resistance at the 50 MA and was unable to break through; SPX traded sideways for the rest of the day, selling off a bit at the close.  SPX remains below 9 EMA and 50 MA.  The market-moving Nonfarm Payrolls report is tomorrow at 0830 EDT; however the market will be closed for Good Friday.  If the report shows that payroll growth has started to decelerate significantly, I suspect we plunge right through that previous low on Monday - if not in the futures market, then after market open.  VIX however isn't worried - it dropped -0.44 to 14.67.  Puts remain relatively cheap.

Bond ETF TLT sold off, dropping -1.06% on the day.  Traders were not looking to buy bonds prior to the long weekend.  Bond traders love bad news - perhaps they didn't think the NFP news would be all that bad.

The CRB (commodity index) was almost flat, down -0.01%.  That's a poor performance given the large move down in the dollar.

WTIC was flat too; no change on the day; not a great performance given the drop in the buck.  Still, this is the second day WTIC has closed above its 50 MA.  WTIC's 50 MA is now moving sideways - an improvement over what it was doing just a month ago.  That's a sign that oil price is stabilizing here around $50/bbl (and that's $40/bbl to you Bakken drillers).  WTIC needs a close above 55 to start looking more bullish.

Which reminds me.  Earnings season for 1Q 2015 is fast approaching.  Shale companies will have to adjust their balance sheets to align with the current price in oil.  Last time they did this, oil was at $90 or so.  The write-downs this quarter (and the accompanying losses) will be astonishing.  It will be interesting to see if any of these companies end up surprising the market by the size of the write-down.

The Atlanta Fed's GDP Now forecast is now projecting 1Q 2015 Real GDP at 0.1%.  Momentum for economic updates has been down for three months now.  My projection: US economy continues to weaken, Fed rate rise is taken right off the table, dollar drops, then foreigners flee the US market (because market starts dropping in their-currency terms), and the reversing capital flows combined with bad economic news tips the US market right over.

Should be good for gold though.

https://www.frbatlanta.org/cqer/researchcq/gdpnow.cfm

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3 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
Nonfarm Payrolls - big drop to 126k

This morning's Nonfarm Payrolls report was off big, down to +126k (down from +295k last month).  This is a big drop, larger than projected - and much larger than hinted at by the Jobless Claims report on Thursday.

On the news, the buck is down -0.65, and the e-mini SPX futures are down -12.  The continued economic weakness story line is playing out.  A strong dollar is not great for economic growth in the US.

This is not positive for equities, but I suspect it will be good for gold.

Just as a reminder, Nonfarm Payrolls is one of my Big Four indicators I watch that tend to rise and fall with the US equity market.  NFP is the last indicator to give way - other things tend to lead, and NFP follows.  But it also acts as reinforcement.  Once NFP starts to drop, it confirms that we are in trouble...

We aren't there yet, but the first step towards a drop is a slowdown, then a move sideways, and then we drop.

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Liquidity

Perhaps there is not enough "liquidity" in the job market, Dave?

Perhaps we should just create fake, I mean 'naked', I mean "liquidity enhancing" jobs, 

Perhaps, we should also just create fake, I mean "naked", I mean "liquidity enhancing" wealth.

After all, a wise man once told me, it is not whether or not there is real underlying wealth to support markets, it is only whether their is enough "liquidity".

Enjoy Easter weekend, find out what the real meaning of Easter is (beyond Easter eggs).

H

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
where did that come from?

Hrunner-

Perhaps there is not enough "liquidity" in the job market, Dave?

I'm not sure where that came from.

If you have a snarky comment (or five) to make about something I wrote, it would be the mark of a gentleman and a testament to your towering intellectual honesty to actually quote what words you found of mine to be objectionable - preferably, prior to the volley of snark that you clearly feel compelled to fire off in my general direction so at least we all have a rationale and/or context as to why you are engaging in such...behavior.

Enjoy Easter weekend, find out what the real meaning of Easter is (beyond Easter eggs).

Happy Easter to you too.  I wish you the best of luck in living up to the teachings and following in the footsteps of a certain Someone.  As always with anything meaningful, its more difficult to practice than it is to preach.

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