PM Daily Market Commentary - 10/8/2015

davefairtex
By davefairtex on Fri, Oct 9, 2015 - 2:57am

Gold fell -6.80 to 1138.20 on moderate volume, while silver dropped -0.38 to 15.66 on heavy volume.  Silver was assaulted by the shorts at around 10:00 in Tokyo, dropping 35 cents in about 20 minutes, and it was unable to immediately recover from that assault.  Both metals fell even more a few hours prior to the the US market open; silver recovered from that drop, while gold did not.

There was some volatility around the time of the FOMC minutes release at 14:00 Eastern; gold popped briefly but sold off almost immediately after.

Gold is weakening.  It managed to find support on its 9 EMA today, but the fact it wasn't able to make a new high this cycle suggests that left to its own devices, gold is probably headed lower.   Unless gold can close above the previous high of 1157 soon, gold will probably move down to test the 50 MA.  Silver may be able to rescue gold if it can keep moving higher.  It is the commodity rally that will provide support for gold, in my opinion.

As mentioned, silver ran into some trouble in Asia, with the shorts attacking soon after the Tokyo market opened.  However silver's recovery after another assault at 08:00 in NY gives me some hope that a bid remains for silver at COMEX.  If the commodity complex can continue its rally, silver may well just rest here before moving higher.  Its hard to know how this will play out, but there is still a hope that this is just the pause that refreshes. 

Miners rallied for much of the day, peaking just after the FOMC minutes were released at 14:00 Eastern.  Unfortunately, soon after that, the miners started selling off, and continued falling right into the close, losing all their gains on the day.  GDX fell -1.28% on moderate volume, while GDXJ dropped -1.87% on moderate volume also.  Both miner ETFs printed gravestone dojis, which is pretty much the last candle you want to see at this point, since it is a bearish reversal candle.  Miners are at risk at this point.

The USD continued dropping today, losing -0.17 to 95.14, having fallen almost 2 points since failing to top the 50 MA a few weeks back.  The failure of the Fed to raise rates plus the Nonfarm Payrolls report has taken its toll on the buck.  Even so, the falling dollar does not seem to be much help to PM right now.

SPX traded sideways for most of the day, until the FOMC minutes were released at 14:00 Eastern; immediately afterwards, SPX took off and ran up 18 straight points, finally closing up +17.60 to 2013.43.  We can read the minutes and ask ourselves, "what might have caused that rally" - ultimately, who can say?  Market liked the minutes, and broke higher.  VIX dropped -0.98 to 17.42.  That's quite a comedown from the highs back on Aug 24th of 52.50.

JNK continued moving higher, climbing +0.36% and supporting the risk-on picture.  I suspect part of the reason: at least one shale company I follow had its bank review, where the lender decided to reduce the company's remaining credit line, but only by 10%.  So instead of having 1.5 billion in available credit, it only has 1.35 billion available.  Shale drillers won't be going BK this month - at least not that one anyway.  JNK is celebrating as a result.

Bond ETF TLT fell -0.84%, dropping below its 50 MA, contributing to the risk-on storyline.

The CRB rose +0.86%, a new closing high for this cycle and the third straight day above the 50 MA.  Commodities continue moving higher after last week's payrolls report.

WTIC rallied today, springing up +1.54 [+3.20%] to 49.67, a new high for this cycle.  Oil has formally broken out of its descending triangle, and is now driving on its 200 MA.  The start of oil's rally can be traced right back to that critical Nonfarm Payrolls report from last week.

HAA has 100 oz gold bars right now in NYC at 1171.40/oz [+2.13% over spot], and 1000 oz silver bars in NYC at 16.43/oz [+3.36% over spot].  Eagles in NYC are quoted at 21.15 [+33.02% over spot].  Premiums on the big bars fell, and premiums on Silver Eagles dropped again today too.

Looks like my computer was wrong about SPX; the FOMC minutes trumps the computer.  Sometimes that happens.  Meanwhile, I think the hope for the PM rally lies in the continued bullish commodity picture.  If oil, copper, and the rest of the commodity complex continues rallying, it will most probably keep a bid under silver, which will (hopefully) drag gold along behind.  The falling dollar might help too.

I have to say, that Nonfarm Payrolls report was the key turning point.  There's nothing that says "no rate rise" more clearly than a bad payrolls number.

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