PM Daily Market Commentary - 5/26/2015

davefairtex
By davefairtex on Tue, May 26, 2015 - 11:45pm

Gold fell -18.20 to 1187.20 on very heavy volume, while silver dropped -0.35 to 16.75 on heavy volume.  Gold, silver, copper, and oil started dropping at around 02:00 EDT and didn't really stop until market close in NY.  While the intraday sell-offs in gold were more abrupt, the overall pattern matched that of the other commodities, and was generally inverse to the rise in the dollar.

Gold is approaching its previous low of 1168.  A break below 1168 will bring this uptrend to a close, and I  expect that would lead to a re-test of the 1140 lows.

Although silver dropped hard today as well, it remains above its 50 MA, and continues to look in every respect a lot stronger than gold.  Silver has retraced most of its recent breakout, but seemed to find some support at 16.75, the previous high.

Miners fell today, with GDX off -2.95% on heavy volume, and GDXJ dropped -2.80% on moderate volume.  Once again GDXJ outperforms GDX, but the miners have entered very dangerous territory, dropping below their uptrend lines.  This sort of thing usually leads to heavy selling on high volume; while GDX didn't look so bad, a number of big miner names had terrible days: Goldcorp -4.58%, Barrick -4.72%, Agnico Eagle -4.49%, Pan American Silver -5.73%.  Traders are bailing out of many of the big miners.

It was a huge day for the dollar, rallying +1.30 [+1.35%] vaulting over its 50 MA and generally causing mayhem in the markets.  It looks to me like traders are guessing the Fed will raise rates sooner rather than later, and this is causing everyone to make adjustments.  Most of the other currencies dropped at least 1% on the day, including the Yen which actually made a new multi-year low today, off -1.23% to 81.23.  Last time the yen was here: mid-2007.

SPX (US equities) dropped -21.86 to 2104.20, breaking below its recent trading range with some enthusiasm.  In general, you don't want to be long equities if you expect the Fed to start raising rates.  VIX rose +1.93 to 14.06; buying puts at VIX = 12 has been a reasonably good bet in recent months.

Bond ETF TLT had a very strong day, rising +1.71% and breaking clearly out of its recent consolidation.  I'm guessing this will mark the low for bonds for a while - although continued progress likely depends on a weak equity market.

The CRB (commodity index) fell -1.70%, dropping in response to the strong dollar.  CRB is now through its 50 MA and is clearly correcting.

WTIC (west texas crude) fell -1.64 [-2.73%] to 58.35, but still has not broken down.  WTIC remains well above its 50 MA, and from all I can tell, traders continue to buy the dips in oil.  A close below 57.50 might change that picture.

The strong dollar is wreaking havoc on PM and the other commodities, and traders are now bailing out of the senior miners on heavy volume.  Gold needs to find support above 1168 or else the uptrend will be at an end.

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davefairtex's picture
davefairtex
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Joined: Sep 3 2008
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Greece can-kicking: technical agreement being drafted

I've been saying for a few weeks now that a Greek-cankick is by far the most likely outcome; I concluded this when Merkel started rounding up supporters in the German parliament.  Here is another bit of evidence.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_27/05/2015_550435

Greece and its creditors are starting to draft a technical-level agreement, a government official said on Wednesday, signalling progress in long-running talks to unlock aid for the cash-strapped country.

"At the Brussels Group (of credit negotiators) today procedures to draw up a staff-level agreement are beginning," the official said, adding that Prime Minister Alexis Tsipras would be in constant touch with other leaders to conclude a deal.

An ETF that tracks the Greek stock market GREK, is up +8.90% today on the news, recovering from yesterday's shellacking.  Not for the faint-hearted, is the GREK ETF.  I'd guess it would probably spike another 20-30% on the signing of such a deal, but YMMV.

You might guess what my position might be based on my assessment, so take what I say with a grain of salt.

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