PM Daily Market Commentary - 10/6/2015

By davefairtex on Tue, Oct 6, 2015 - 11:58pm

Gold rose +11.70 to 1146.80 on moderate volume, while silver climbed +0.25 to 15.89 on heavy volume.  Silver started rallying about an hour before the US market open, and gold soon followed.  Silver managed to break above its 200 MA hitting a high of 16.09 a little before mid-day, but lost about 40% of its gains by closing time.

Gold rallied right up to its medium term downtrend line but was unable to close above it.  It also still needs a close above the previous high at 1157.  Until this happens, gold remains in a downtrend.  Things are improving, but at least for now, gold is the poor stepchild.

Silver had another good day, breaking above the previous high at 15.74, managing to move through the 200 MA for a time, only to fall back below by end of day.   Perhaps it was too much to ask of silver to break through two resistance levels in one day.  Still, the close above the old high of 15.74 was a very good sign, and you can see how much stronger the silver chart looks compared to gold, which has still to break its downtrend line.  The volume for silver in the last three days has been quite strong.

Miners once again followed silver and did well today, with GDX up +3.70% on heavy volume, while GDXJ rose a lesser +2.74% on moderate volume.  Senior miners continue to close on the previous high at 16.25, which will happen in the next day or so at the current pace.  Volume continues to be quite strong in the senior miners; probably a combination of short covering and new buying interest.

Juniors continue to significantly underperform the seniors, which is a bit of  warning sign to me.  It means something is a bit off in this rally.

The USD dropped hard today, selling steadily from the start of trading in Asia and accelerating after the US market open.  USD dropped -0.68 to 95.56, closing below the 200 MA for the first time in three weeks, seemingly deciding on its direction after 10 days of indecision.  Perhaps this was a delayed effect of the Nonfarm Payrolls report.  The move in the USD didn't seem to affect commodities, but the dollar started really dropping at the same time the US equity market peaked for the day around 10:00 and started to sell off.

After rallying for five days in a row, SPX ran into a bit of selling today, dropping -7.13 to 1979.92.  As mentioned, this happened at the same time as the dollar selling accelerated; the two seemed related.  As I mentioned before, the time to enter short is after the market's rally starts to run out of gas, as it might be doing right now. 

JNK continued rallying today, rising +0.31%, probably on the strength of oil's big move.

Bond ETF TLT bounced up +0.43% today, finding support at its 50 MA.  Bonds are looking considerably better than in prior weeks.  Perhaps whomever it was that needed to no longer feeling the pinch.

The CRB had a huge move today, rising +1.91% closing above the 50 MA for the first time since June.  The picture for commodities has been steadily improving since Friday's Nonfarm Payrolls report appeared to put a stake in the heart of any near-term Fed rate rise.

WTIC went absolutely nuts today, rising +2.84 [+6.15%] to 49.04, breaking cleanly above its recent trading range and closing at the highs of the day.   Once the breakout occurs, the oil shorts will be scrambling to cover, and that might well help propel oil above its 200 MA, which oil hasn't seen since mid-2014.

Not everything in the commodity complex is rallying, but a lot is and the picture of overall relief is pretty clear to see.  I did not realize just how much the prospect of the rate rise was weighing on the commodity market, but we can see from the market's reaction to the Nonfarm Payrolls report just how much it did.  Is the market now imagining more money printing might be in the offing?  Perhaps.

There was some commentary about trends today, and I thought I'd weigh in.  What is the current trend?  Well, it all depends on your timeframe.  On the daily chart, the trend for silver appears to have changed from downtrend to uptrend.  However, if we zoom back to the 6-year timeframe, we see a very different picture.  The strong daily-chart recovery is difficult to spot on the 6-year chart.  A close above the blue weekly 50 MA would be something noticeable - and a close above the downtrend line at 17.50 would be very noticeable.  That's what is needed to start a long term trend change.

HAA has 100 oz gold bars right now in NYC at 1173.42/oz [+2.22% over spot], and 1000 oz silver bars in NYC at 16.47/oz [+3.55% over spot].  Eagles in NYC are quoted at 21.41 [+34.57% over spot].  Premiums on the big bars were little changed, and premiums on Silver Eagles dropped again today.

This is the third day of rallying following Nonfarm Payrolls.  Until the volume tapers off and/or we see some sort of reversal bar, this thing could just keep going.  Silver does that when its on a roll, and it seems to be on a roll right now.  That said - a few more days of this, and all the Managed Money shorts in silver will probably be out of the picture.  At that point we will need buyers at COMEX to continue moving prices higher.

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