PM Daily Market Commentary - 8/10/2015

davefairtex
By davefairtex on Tue, Aug 11, 2015 - 1:19am

Gold rose +10.40 to 1103.70 on heavy volume, while silver climbed +0.41 to 15.19 on heavy volume also.  PM took off shortly after market open in NY, with gold at one point hitting a high of 1108.50.  I didn't see any particular reason for PM to take off - perhaps the dollar started dropping at that same time.  Sometimes the buyers just decide to show up and we're off to the races.

Gold finally made its swing low, and also convincingly closed above its 9 EMA.

Silver had an even stronger move than gold, breaking above its recent trading range on good volume.

Senior miners had a terrific day, with GDX climbing +6.64% on heavy volume, closing above their 9 EMA, forming a swing low, and closing at the high.  Junior miners did almost as well, rising +5.72% on heavy volume.

The USD sold off today, dropping -0.42 to 97.20; this is the third straight down day for the buck.  Gold in Euros has just moved sideways over the past few weeks, so a reasonable chunk of gold's advance was currency-related.

SPX rallied hard today, climbing +26.61 to 2104.18.  The equity market started climbing during the London trading session, and just continued to climb once NY opened right through to the close.  SPX is now back above its 50 MA, its 9 EMA and is looking relatively strong.  However, until it closes above the trading range of the last 8 months, it is still more or less just chopping sideways over the longer term.  VIX dropped -1.16 to 12.23.

Bond ETF TLT fell -1.24% - bonds didn't like the equity market rally.  Bonds fell as SPX rallied.  Bonds remain in an uptrend even with today's loss.

The CRB (commodity index) rallied strongly today, climbing +2.08%, closing above its 9 EMA, and printing a swing low.  Hopefully this is the commodity reversal we've been waiting for.  Certainly the sheer number of bearish news stories about how doomed the commodity sector is might be a clue that a low is near.  I believe the big guys encourage such stories to cause capitulation at the lows - so they can buy.  Is this such a time?  I'd say the odds are good it is.

WTIC (oil) rose +1.08 [+2.47%] to 44.83, a solidly positive day that nevertheless failed to cross the 9 EMA, or form a swing low.  Brent did a little better, climbing +1.55 and printing a bullish engulfing candle.  Oil equities had a great day.  I'd like to see oil cross that 9 EMA and print a swing low before getting too excited, but if the whole commodity complex reverses, oil will probably follow.

Ok, now that gold has printed its swing low, we have a tactics issue:  getting on board the trend reversal.  Do we buy at the open tomorrow?  Or do we wait and see if the market sells off a bit, and then buy?  Often selling appears, especially in the miners, immediately after a massive day like today.  Traders cash in their 10% one-day gains and so things retrace.  It is usually not a straightforward "buy and then shoot the moon" proposition.  Yet now is the time to jump on board, the odds are with us, and its just a question of when.

Last point: is important to understand that this is a percentage play, not a guaranteed money printing exercise.  For example, Armstrong's computer is long gold @ 1090, with a stop at a closing price of 1084, and a sell price target of 1144-1155 http://www.armstrongeconomics.com/archives/35822.  The stop is there in case the market surprises everyone and goes the other way - and sometimes that happens.

FWIW, my computer picked a low three weeks ago.  I thought it was early.

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4 Comments

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1428
Crude and Miners Down but PM Up

Gold and silver are holding.  A non-linear crack-up event may be at the door.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
crack up event?

Kugs-

I don't see a crack up event.  I see commodities struggling to form a bottom.  My guess: lots of people are still selling because of the barrage of bad commodity news.  "OMG commodities will be free tomorrow better sell now!"

I'm guessing the big banks are writing the news articles, and doing the buying.

Then a few weeks from news will improve, pundits will start to say, "hey wait, commodities are really cheap now", and retail will storm back in, there will be a flurry of short-covering, and then the big banks will sell the rally.

If you have information on big-bar shortages/premiums I'd love to hear about it.

phusg's picture
phusg
Status: Member (Offline)
Joined: Jul 16 2014
Posts: 23
Junior vs senior

Hi Dave,

I've been lurking your blog for some time, thanks for the education! Do you have time to comment on for which purpose GDX is better than GDXJ?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
GDX vs GDXJ

phusg-

So I'd expect GDXJ (junior miners and some silver miners - check inside and see what that ETF owns) to race higher more quickly in a rally, and fall more rapidly in a correction.  That's the usual pattern anyway.

Notice too how the miners sold off in the morning, only to recover in the afternoon.  I think that's a really good sign.  The early longs are cashing in, but in general, traders are buying the dips.  Also, miners closed at the high - another good sign.

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