PM Daily Market Commentary - 8/19/2015

davefairtex
By davefairtex on Wed, Aug 19, 2015 - 10:42pm

Gold broke out, rising +16.80 to 1133.80 on heavy volume, while silver rallied strongly, up +0.43 to 15.27, recovering almost all of yesterday's big drop.  Gold's rally started in Asia; once it broke above 1117.50 it just kept climbing right through to the close, derailed only briefly by a CPI release at 08:30 ET that showed an annualized core inflation rate of 1.2%.

Boy, when things turn out the way I draw them on my chart, I feel quite fortunate.  Today we got to see a cup & handle breakout I talked about just two days ago.  But I can't take credit - the buyers made that all happen.  That and my trader friend who pointed it out to me.  Still, things do seem to be working out right now for PM.  Next level of concern is the 50 MA which right now is at 1138.  Also - Armstrong's computer suggests selling at 1140-1150, which corresponds to the previous low set back on March 17 of 1141.60.

Volume was decent, and the close was right at the high.  No explosive moves yet for gold, which tells me that the huge collection of shorts have yet to cover in any meaningful way.

But what is going on with silver?  Today traders pushed silver right back up, retracing virtually all but two cents of yesterday's massive loss.  The rally stopped right at the 50 MA.  I don't quite know what to make of it.  Was yesterday just a big head-fake?  Was it a trick to flush out the recent silver longs?  Until silver closes above the 50 MA for a couple of days in a row, I feel the jury is still out on silver.

GDX performed relatively well today, climbing +2.91% on moderately heavy volume.  I only give it a "relatively well" grade because several times it looked like the miners had a difficult time rallying even though gold was doing well all day long.  And you can see on the chart that gold has broken out of its cup & handle formation, while GDX is still playing around inside the "handle" and has yet to break out.

GDXJ did well also, rising +3.35% on moderate volume.  GDXJ outperformed GDX, which is a good sign, and it is now closing on its 50 MA, which may act as resistance.

The USD was hit hard today, dropping -0.70 to 96.37, dropping through its 50 MA and wiping out three days of gains.   I've been sensing that the buck is weaker now than in the past - and we can see the outcome today.  Three days of slow movement up, followed by one large day of movement down.  Most of the damage happened after the FOMC minutes were released - early, as it happens, at 13:42 ET.  Buck popped higher briefly, and then sold off hard.  I honestly don't see why, it didn't seem like they said very much new - they did mention the word "China" in the context of potentially not raising rates, maybe that was it.

SPX had a difficult day, dropping -17.31 to 2079.61.  Market sold off early, then rallied strongly after the FOMC minutes early release, but then sold off hard into the close.  SPX is just above its 200 MA.  VIX had another good day, up +1.46 to 15.25.  Traders are buying more protection - the sense I have is that they feel a correction is coming.  At least that's what the behavior of the VIX is telling me.

Bond ETF TLT rose sharply, climbing +0.99%.  This aligns with the feeling of "risk off" seen in equities.

The CRB (commodity index) was smashed, dropping -1.53%, making a new low on the day.  No good news for commodities.  This makes the performance of both gold and silver even more remarkable.  Nobody expects silver to have any "safe haven" component to it.  At least not normally anyways.

WTIC (oil) rallied early, moving above that all-important 9 EMA, only to pull back...and then basically crater following a bearish-looking Petroleum Status Report at 10:30 ET.  WTIC dropped -1.43 [-3.38%] to 40.94, volume was massive.  In the past, this selling pattern off a Petroleum Status Report has led to several more days of selling; if history repeats, we'll likely see oil in the 30s by end of week.  Does this validate the whole "wait for a close above 9 EMA" strategy or what?  I admit it, I was seduced by the initial move today, but fortunately I put stops on the stuff I bought, so my losses were small.  Its ok to be wrong - just bail out fast and no harm done.

Gold is now diverging strongly from commodities; given where commodities are currently heading, that's a really good thing.  Safe haven?  Gold is money?  August is a good month for gold?  Impending COMEX default?  Ok, not the last one.  :-)  No premiums to speak of for PSLV or PHYS = no COMEX default.

The best part is, as far as I can tell, the shorts haven't really even started to cover yet.  If and when they do, the move up could get pretty exciting.

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4 Comments

HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 764
Interesting market plunge today

The market plunge today seems to be accompanied by an increasing number of stories in the mainstream media about the rally getting tired out (e.g. this CNBC article on El-Erian's view on apparent 'classical overshoot').

It will be interesting to see how the Fed's possible interest rate changes in Sept. will affect things.  Is an interest rate hike of 0.25% already priced into the market?  And if so, if the Fed decides not to raise rates in Sept, which seems likely now, will the markets have one last little party on that news?

It's tempting to forecast a market crash in the US between this fall and fall of 2016, and that's what I think will happen.  But, maybe things are distorted to such an extent that some combination of jawboning/propaganda and money creation will lead to an even higher stock market, in the midst of stagflation in the real economy.

The price of oil and other commodities makes me think that we're looking at a market crash this fall in the US & UK, but it's hard to simplify this complex and deformed picture, and I thought we'd have such a crash in the fall of 2013 and then the fall of 2014, so I guess I'm just a perma-bear.

 

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5971
Gold Breakout continues

Gold is now safely over the 50 dma...no real panic short covering, good volume but gold tends to move up very differently from how it moves down...very orderly on the way up with lots of little consolidation and testing moments along the way.

Needless to say, when it goes down it gets clubbed all at once...well that's hyperbole on my part...it actually moves down over the course of many milliseconds, sometimes as many as 100.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5685
golds movements

Sometimes I've seen gold spike up hard, other times it moves up slowly.  It seems to depend on if the big guys want to run the stops on the way up or not.

The common statement about markets is, "markets are an escalator on the way up, and an elevator on the way down."  Gold is not unique here, although my sense is that goldbugs tend to think their particular market is being singled out for mistreatment when in fact it usually performs better than a lot of other things I could name.

If you owned oil over the past eight weeks, you'd have a much more visceral sense of what I'm talking about.

I have to say, it sure is more fun to write about rebounds than it is to write about endless downturns.  :-)  We have breakouts in the miners, and silver too.  I'm happy to see them all catching up.  Perhaps copper's rally is helping at least to some degree.

I'm also happy to see gold over the 50.  If it closes here at end of week, it will be interesting to see what Armstrong says.  Re-reading his stuff, he suggested it was common for things to retrace back to their reversal point, in this case 1155.

Anyone else notice that SPX dropping seems to help PM?

Trun87114's picture
Trun87114
Status: Bronze Member (Offline)
Joined: Apr 28 2013
Posts: 80
SPX and PM

I've definitely noticed the inverse correlation between stocks and PMs over the past few years and have been on the wrong end of it for the past 18 months.  I fully expect stocks to crater any time now - it may have already started - and I am betting and hoping that the inverse relationship continues!

If it's a serious correction I would expect to see money flowing into alternative investments like PM.

If it's a crash/SHTF scenario, all bets are off but it would seem likely that PMs might blast off.

however, if we see more signs of serious deflation, I suppose PMs could go even lower.

 

 

 

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