PM Daily Market Commentary - 12/8/2015

By davefairtex on Wed, Dec 9, 2015 - 4:34am

Gold rose +3.40 to 1074.10 on moderate volume while silver fell -0.09 to 14.14 on moderately light volume.  Although crude made a new low, gold held up relatively well, with silver stuck somewhere in the middle.

Today, gold encountered a bit of selling, but the buyers at COMEX pushed prices back up above the 9 EMA by the close.  These moving averages aren't voodoo or entrail-reading - moving averages help traders eliminate both hope and fear from their decision making process.  If I hope gold will rise, that tends to influence my buying decisions.  A moving average is an impartial observer.  It doesn't care if gold rises or falls.  As a result, traders use them as waypoints in gauging market buying and selling pressure.  For gold, since it held above the 9 EMA, it appears that traders are buying the dip in gold - coupled with the COT report, and compared to the relative disaster in crude, gold seems to be holding up pretty well.  This looks to be a decent entry point for gold.

Silver did not do as well as gold, dropping below its 9 EMA today.  Here is where those moving averages come in handy.  Although we know that silver is the best electrical conductor ever, and it is currently selling below mining costs, and we really hope silver will go up - that 9 EMA sits there and renders judgment on the current market sentiment: "not enough buyers at COMEX."  At least not today anyway.  Chart shows buyers just aren't as enthusiastic about silver as they are about gold right now.

Although the miners continued to sell off today, they didn't drop too far, with GDX off -0.85% on moderate volume, while GDXJ down -0.67% on light volume.   GDX did dip below the 9 EMA intraday, but buyers pushed prices back up in the last 30 minutes of the trading day.  Miners continue to catch a bid.  Once again the EMA lets us see the difference in behavior between gold, silver, and the miners.

USD fell -0.20 to 98.47, looking a bit as though the recent bounce is a bit of a dead cat bounce.  Buck remains below its 9 EMA, and it feels as though the dollar will continue selling off.  Last Thursday's ECB meeting was the key to the buck's future, at least for now.  Have we reached peak Draghi?  The market feels tricked, I suspect, and this might make it more difficult for Draghi to move the market with his words going forward.  Confidence is a funny thing; built only slowly over time, and once lost, it is quite difficult to regain.

We could still get a dollar rally if the upcoming (Dec 16th) FOMC meeting ends up raising rates 0.25 AND releases a hawkish-sounding statement.  If the market thinks the upcoming Fed rate raise is one of a series of rate increases, that will be seen as quite negative for equities, negative for shorter term bonds, and positive for the buck.  So for now the buck looks to be correcting, but that could all change on Dec 16th.

I for one am excited at the thought that my savings account might actually yield something more than 0.0%.  Or that I can buy a 6-month treasury bill and have it yield 0.6% instead of 0.10%.  Ok maybe excited is a strong word.  But its better than a poke in the eye with a sharp stick.

SPX dropped -13.48 to 2063.59, closing just below its 200 MA.  The drop-dead line (previous low) is 2020; a close below that, and we probably get to see some serious selling.  FOMC meeting result could prove to be decisive for the equity market direction.  VIX climbed +1.76 to 17.60.

JNK suffered a huge loss, dropping -1.15%, plunging below its previous low, all on very high volume.  It appears as though traders are starting to panic out of junk once again.  I guess oil at 37 is spooking the herd.

Bond ETF TLT climbed +0.06%, more or less no change on the day.  It remains in bullish territory, a stark contrast to the performance of its junkier cousin.

CRB fell -0.66%, making yet another new all-time low.  It did print a doji candle, which is a reversal bar, so that's a bit of good news.  If oil can put in a low here, CRB might follow along.

While stockcharts has oil rallying +1.62 closing at 39.25, that's just an artifact of contract roll and contango.  In reality, WTIC fell -0.15 to 37.60, making a new low intraday of 36.64 but managing to climb back up to almost flat.  WTIC printed a doji today, which is a hopeful sign that we may have reached a temporary low in oil prices.

In the face of dropping commodity prices, gold is hanging tough, silver less so, with the miners somewhere in between.  If oil can put in a low here at 37, I suspect gold will take off.  Otherwise, we might be bouncing along the bottom for a while.  We have the Petroleum Status report tomorrow at 10:30 Eastern.  I'm not saying everything depends on oil, but - ok maybe I am, at least near term anyway.  If oil cannot find a bottom and continues to plummet, PM will struggle and silver will likely fall further.  At least the dollar isn't going up anymore - that's something.  Although we have that Fed meeting next Wednesday...

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1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
buck crushed today: off -1.08%

I am certain that Mario Draghi is gnashing his teeth.  Damn market didn't understand what he was saying!

Here's an article by an ECB voting member who blames the markets for the massive Euro rally.  You really have to read it to believe it.

European Central Bank policy maker Ewald Nowotny said the financial community misjudged the state of the euro-area economy and thus had unrealistic expectations for more stimulus last week.

“It was absurd what expectations were expressed,” Governing Council member Nowotny told reporters in Vienna on Wednesday. “I believe it was really a massive failing of market analysts. I don’t believe the ECB’s communications policy gave a false signal.”

When I read this, I almost choked.  It is HIS job, the guy at the ECB, to understand the market - NOT the other way around.  Oh my God.  This guy is such a chucklehead.  What, he imagines he can slap the blame on "the stupid analysts" so that the ECB can cling to some shred of credibility after overpromising and then under-delivering?

That's like a trader blaming the market for mis-reading the state of the economy and selling off on a bad payrolls report.  "My trade would have made money, if those other traders had really understood just how good the jobs report actually was..."

If your job as a Modern Day Central Banker is to manipulate the markets, the one and only judge of how well you did your job is the market's response to your action!  You goddamn well better figure out how the market is leaning prior to your action, or else you're just an idiot.  To go one step further and publicly castigate the market for its response - its simply unbelievable.   It smacks of desperation.  It's a public admission of incompetence.

The ECB screwed up somewhere along the line, and they're casting around desperately for some way of regaining credibility.

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