PM Daily Market Commentary - 4/6/2015

davefairtex
By davefairtex on Tue, Apr 7, 2015 - 5:25am

Gold rose +12.00 to 1214.50 on moderate volume, while silver climbed +0.22 to 16.97 on moderate volume also.  Gold opened higher in Asia, rallied due to a falling dollar at one point hitting 1224.50, but then fell back again when the buck found support.

The bad Nonfarm Payrolls report on Friday occurred when the gold market was closed.  The jump in price at the open on Monday was a delayed reaction from this report.  Both gold and silver ended up printing gravestone dojis due to the failed rallies - that particular candle is not really what you want to see if you are a bull.  They always make me nervous.  Still, gold managed to squeak over its 50 MA, which is a bullish signal, and it did manage to set a new intraday high for this cycle.  Today's move in gold was mostly currency-driven, due to the -0.71% fall in the buck.

The miners moved up strongly today, with GDX up +3.74% on moderately heavy volume, while GDXJ rallied a big +4.94% on moderately heavy volume as well.  Miners looked stronger than gold itself (the candle prints for GDX was a spinning top - "neutral" vs the bearish gravestone doji) although miners did not manage to set new cycle highs today, unlike gold.  The GDX:$GOLD ratio is climbing once again, but it has not yet regained its prior high, which says the miners have some distance to make up to catch up with gold.

The dollar dropped today because of a delayed reaction to that bad Nonfarm Payrolls report on Friday.  At one point the buck was off a big -1.20, but then it found support, rallying back and closing at a loss of only -0.71 [-0.73%] to 96.96.  In spite of the big rally, it was still a large move down, and the dollar is rapidly approaching a point of decision.  The buck's 50 MA is not far away which is also the same price level as the prior low - a close below that overlapping support level would encourage even more traders to sell the buck.  The buck hasn't closed below its 50 MA since July 2014 - 9 months ago.

SPX has had an eventful two days; the futures markets were open on Friday for the Nonfarm Payrolls report to hit, and they fell sharply on the bad news, closing down about -20 points after the release.  (Why SPX e-minis were open for Good Friday, and COMEX wasn't - hey I don't make the rules).  Then on Monday in Asia and London the e-minis traded mostly sideways.  But then on Monday in NY, we got to hear from a Fed Governor, a Mr Evans, who gave a speech prior to market open where he said enough soothing things to spark a rally.  And it wasn't a small rally.  First in the futures market, and then once the NY market opened, equities rallied very strongly, perhaps 35 points from low to high.  The size and strength of the rally wasn't apparent in the candle print on stockcharts.  SPX ended up +13.66 to 2080.62, totally wiping out losses from the poor Nonfarm Payrolls report, and piling on some gains besides.  However even with the big rebound, the VIX rose +0.07 to 14.74.  That's a surprising outcome, given the strength of the rally in SPX.

Normally Nonfarm Payrolls would have been enough to send the market down hard.  And it did, until Governor Evans spoke ("don't worry about bad NFP reports, its a temporary phenomenon").  My conclusion: market belief in the Fed is still very strong.  Is that enough to withstand more bad reports?  Its hard to say.  I'm betting not, but then again I was also surprised by the strength of today's rally.

Bond ETF TLT dropped, closing off -0.56% and dropping below its 9 EMA, but it found support on its 50 MA.  Losses in bonds were the mirror image of the rally in SPX.

The CRB (commodity index) had a brisk rally today, moving up +1.82% and closing above its 50 MA for the first time in 9 months.  Does that timeframe sound familiar?  That was the time the dollar rally started - July 2014.  CRB really likes a sinking dollar.

WTIC staged an impressive rally today also, climbing +2.44 [+4.92%] to 51.99, closing at its highs for the day.  Oil is looking stronger lately.  Part of the rally was due to the news that US refineries were projected to start drawing down hard on the surplus oil in storage in the US.  Its hard to know which news matters and which news doesn't - so I just watch the prices.  This marks the third day above the 50 MA for oil; both 9 EMA and 50 MA are now rising.  A close above 55 is still needed to confirm the double bottom for oil that is visible on the weekly chart.

Gold, commodities, oil, they all like a weaker dollar.  Over time, if you watch the patterns, that's what you will see.  Currently, the buck is weakening alongside weakening US economic news.  My guess: if the US macro data continues to be bad, and Greece doesn't fall apart, the dollar correction will continue.  A close below 96.30 in the buck would be significant, and that would help gold.  

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