PM Daily Market Commentary - 6/3/2015

davefairtex
By davefairtex on Wed, Jun 3, 2015 - 11:57pm

Gold fell -7.70 to 1185.50 on moderate volume while silver fell -0.30 to 16.48 on heavy volume.  PM sold off for most of the day, with gold dropping briefly below support at 1180 making a new low before bouncing back.  The buck fell as well, which means that gold in Euros dropped particularly hard: it was down -1.69%.  My sense is, the unwind of the Greek-driven safe haven trade continues.

Gold in euros is quite close to breaking down - if support doesn't hold, the selling could become quite intense, possibly driving gold through the 1130 lows.  It seems that a settlement of the Greek problem may end up causing some serious losses for PM.

Miners sold off too, with GDX off -1.87% on moderate volume, while GDXJ lost -1.23% on light volume.  Once again the junior miners continue to outperform the seniors.  GDX has dropped back below its 50 MA; a few more days of selling and a break of support could very well cause in a high volume sell-off as it did several months ago.

Risks are increasing in PM.

The buck fell -0.37 to 95.51, continuing yesterday's correction.  The Euro was up +1.07% moving strongly higher, mostly I believe as a result of continued optimism about a (short-term) settlement to the Greek problem.

SPX (US equities) rallied weakly, climbing +4.47 to 2114.07, a mid-morning rally failing with SPX printing an inverted hammer candle.  While SPX does not look strong, neither does it appear to be ready to break down just yet.  VIX fell -0.58 to 13.66.  SPX needs a close below 2100 before the longs will even start to get nervous.

Bond ETF TLT was crushed again today, dropping -1.61% and making a brand-new six month low.  Money has fled bonds for the past three days running.  This is a "bond tantrum" in the making, and no doubt it has the Fed upset.  How dare the market decide on its own what the long rate should be?  A settlement in Greece, and the prospect of a Fed rate rise means nobody wants to own the US long bond.

Its not just US bonds that had trouble today - the 10 year bonds of the core EU nations also experienced massive selling, with Germany's 10 year yield rising a huge 19 basis points in just one day.  This EU bond-tantrum is happening right alongside the ECB's money printing/bond buying operation, clearly showing where the power in the markets happens to be - when the market wants to go somewhere, it does, and right now the market wants to be out of bonds.

The CRB (commodity index) fell -0.99%, a surprising loss on a day when the dollar fell.

WTIC (west texas crude) fell as well, losing -1.43 [-2.34%] to 59.61.  Brent crude actually looks substantially weaker, showing a consistent bearish pattern of lower highs and lower lows - my guess is, Brent will end up dragging WTIC lower should oil begin to correct in earnest.  Last week Brent found clear support on its 50 MA, but a break below the 50 may end up causing a lot of selling in oil.

Here's a chart of Brent, which shows both the recent downtrend, as well as the upcoming key support at the 50 MA.

Gold continues to look weak, is right at support for gold valued in Euros, and any break below that support would probably lead to a big down day, which would drag the miners along for the ride.  However its not just gold - the US long treasury is also breaking down, as is the USD to a lesser extent.  The safe haven trade is unwinding; the markets may not be right about how the Greek situation will end up, but at the moment they are increasingly predicting a "happy outcome" in Greece.

Can Will Be Kicked Again.  You heard it here first!

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7 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5069
Greek talks - good progress

Positive-sounding article from Ekathimerini (a right-of-center Greek newspaper, which does not like Syriza at all) about the status of talks to resolve outstanding issues.  It sounds like differences are actually being split on the issue of primary surpluses, while pension issues remain.

It all feels like theater to me at this stage.  I believe the actual decision to go forward with a settlement in Greece happened two weeks ago when Merkel decided to rally her troops in parliament.  Once that happened, it was all just a matter of execution details.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_04/06/2015_550662

After around five hours of talks in Brussels aimed at sealing an agreement with Greece's creditors, Prime Minister Alexis Tsipras told reporters early on Thursday that there had been progress, particularly vis-a-vis Greece's primary surplus targets, noting however that talks would continue over the "next days."

Tsipras, who met with European Commission President Jean Claude Juncker and Eurogroup chief Jeroen Dijsselbloem, referred to the "constructive" stance of the European Commission during the discussions and said the two sides were "very close" on primary surplus targets.

However, in an acknowledgement of the differences that remain to be bridged between the two sides, Tsipras said that the "realistic proposals" were those of the Greek government.

He referred in particular to proposed pension cuts which he indicated that Greece could not accept.

Dijsselbloem was characteristically terse but said the talks were "very good" and would continue over the next few days.

In a statement, the EC referred to a "good, constructive meeting," and signaled that there would be another meeting, saying " intense work will continue."

cmartenson's picture
cmartenson
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Posts: 5570
Brent right thorugh that key support

We'll see what happens next, but Brent is about 60 cents below that key 50 dma support. 

I suspect that economic weakness is more than advertised and that oil is telling the story...

Time2help's picture
Time2help
Status: Diamond Member (Online)
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Posts: 2766
Re: Brent Right Through That Key Support

Time2print.

Time2help's picture
Time2help
Status: Diamond Member (Online)
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Posts: 2766
Greece

The whole Greek thing, it's all just a side show. 

davefairtex's picture
davefairtex
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Joined: Sep 3 2008
Posts: 5069
sideshow

Eh, Greece isn't a sideshow if you happen to own an ETF that contains a bunch of Greek stocks in it...  :-)

Its also been a very useful Euro-suppression tool for the Germans.  My thought anyway.

Time2help's picture
Time2help
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Posts: 2766
Greece (clarify)

Agree with you there (both points), hopefully people are being careful when picking Greek ETFs. 

My point (the impression I have) is that the whole Greek soap opera up to this point feels "stage managed", something about the back-and-forth between the Greek (prov)Gov, the IMF, ECB, etc...it all just feels "put on".  Feels fake, like it's there to buy time. 

Not saying mom and pop in Greece aren't getting shafted. 

Might as well begin the weekly press conferences with this:

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5069
stage-managed

time-

My point (the impression I have) is that the whole Greek soap opera up to this point feels "stage managed", something about the back-and-forth between the Greek (prov)Gov, the IMF, ECB, etc...it all just feels "put on".  Feels fake, like it's there to buy time.

Yeah, I agree, it does feel artificial - at least this phase of it anyways.  The earlier ones, I'm less sure about, but this phase definitely seems staged.  I suspect we'll find out soon why they were strung along for so long.

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