PM Daily Market Commentary - 9/28/2015

By davefairtex on Tue, Sep 29, 2015 - 1:19am

Gold fell -14.20 to 1131.30 on moderately heavy volume, while silver was hit much harder, dropping -0.53 to 14.56 on heavy volume.  Both gold and silver started selling off in Asia, and the selling didn't stop until an hour before the US market open. 

Two days of losses have eliminated gold's rally from last Thursday, but gold remains in an uptrend; it is still well above its 50 MA and it has retained its short term bullish pattern of higher lows and higher highs.  Everything else is looking relatively ugly, but gold still looks all right.

Once again silver is looking worse than gold.  It broke below both the 50 MA, and last week's low, the volume on the down-days is heavier than on the up-days, and the gold/silver ratio shot up +1.79 to 77.67.  While silver hasn't broken its shallow uptrend dating back to the lows on Aug 26th, neither is it looking particularly strong.  Silver needs to remain above the previous low of 14.25 to keep this shallow uptrend alive.  The 14.25 support level isn't very far away.

Miners sold off hard today, with GDX off -4.72% on moderate volume, while GDXJ falling -4.18% on moderate volume too.  Miners continue to look weak - one sign is that they have been unable to close above the 50 MA for more than a day before selling off.  Another is the descending triangle pattern, which involves a series of lower highs and a support level at 13.00.  Two weeks ago I had hopes for a bullish "double bottom" pattern, but it looks like the miners are more likely to break down than up, at this point.  The GDX:$GOLD ratio also continues to look bearish.

The USD rallied strongly during Asia and London, only to sell off shortly after the US market open.  The falling dollar did not seem to help PM much at all, and it seemed to actively hurt the US equity market.  USD dropped -0.25 to 96.18, and it remains just below its 50 MA.  The buck is still trying to decide if it will continue rallying or sell off; I think its more likely to drop at this point.  That said, it is important to remember that we are just talking about DX which only looks at the currencies of the 5 major economies, rather than the emerging markets.  When you look at the EM currencies, they all continue to drop against the buck.

SPX started dropping at the open, and it pretty much didn't stop until the close.  There was some selling in the futures markets, but the real move came after the US market open.  It was just a really bad day for equities, with SPX closing off -49.57 [-2.57%] to 1881.77.  The low from Aug 23rd is 1867.01, which is not that far away.  My guess, just based on velocity is that the lows will not hold.  The market is somewhat oversold, but it could easily drop quite a bit further before rebounding.  VIX rose +4.01 to 27.63.

Supporting this "risk off" mood is JNK, which fell a huge -1.44%, a very large move for JNK in just one day.  JNK made a new low, and is now selling at prices not seen since 2013.

Bond ETF TLT rallied strongly on the day, climbing 1.71%.  It still hasn't managed to close above its 200 MA, but the cratering equity market has managed to attract some bond buyers.  That "IEF:JNK" paired trade is actually working out once again - I just mention it as a sign of stress in the market.

The CRB (commodity index) fell -1.49%, moving steadily lower and once again dropping below its 9 EMA.  Commodities continue to slowly weaken.

WTIC (oil) fell also, dropping -0.86 to 44.48, moving closer to that critical 44 support level.  A break below 44 will probably lead to big trouble for the oil market.  Oil equities continue to sell off.

HAA has 100 oz gold bars right now in NYC at 1154.47/oz [+2.% over spot], and 1000 oz silver bars in NYC at 15.08/oz [+3.81% over spot].   Eagles in NYC are quoted at 20.86 [+38.16% over spot].  Premiums on the big bars were slightly higher, and Silver Eagle premiums were mostly flat.

Platinum was down -3.01% and made a new low dating back to January 2009, and copper is right down at its low from Aug 24th.  There isn't a whole lot of good news out there right now.  Cash, as they say, is a position too.

Gold's chart remains relatively strong, for now.  Most everything else looks terrible, except perhaps for US treasury bonds, which look just ok.

My computer is making some interesting suggestions.  Looking forward a month or two, it sees limited downside for SPX, and it is telling me SPX has the potential for a nice rally.  It sees a lot of risk for the miners, and it thinks that silver has more upside right now than gold.  It sees oil and copper having only a limited downside, with a potentially large rally for copper.

In the near term from a timing perspective, it says gold and silver have both topped out and will probably move lower, and SPX has yet to put in a low.   The timing code is more bearish on silver than on gold.

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