PM Daily Market Commentary – 1/13/2015
Gold fell -2.50 to 1230.90 on moderately heavy volume; silver rose +0.48 to 17.09 on heavy volume. Today gold spiked up through the previous high at 1240 hitting 1244.50 during trading in Asia, but was unable to keep those gains into the close, resulting in a failed rally and an inverted hammer candle print. Silver on the other hand had a very good day, breaking above its recent 5-day consolidation pattern, keeping most of its gains into the close.
Silver's breakout above consolidation happened early in Asia trading, but the upside assaults did not stop – they hit silver repeatedly, with half a dozen upside spikes that finally ended at 1130 in NY trading, with silver touching 17.21 as a high for the day. The fact that silver held most of its gains into the close suggests that this might be more than just a short covering rally, and that we could have a chance at a close above 17.35, which would end silver's medium term downtrend. The fantastic move in silver caused the gold/silver ratio to drop -2.23 to 72.02. It is now looking substantially more bullish.
The buck rallied today, closing up +0.23 to 92.46. The buck moved steadily higher for most of the day, and looks like it might be preparing for yet another breakout higher. Greek elections on January 25th – just the latest reason amongst a sea of reasons for the dollar to remain strong.
Mining shares were crushed today; while they opened up briefly, they sold off hard right after the open, and continued lower for most of the day. GDX was down -4.37% on heavy volume, while GDXJ was off a lesser -3.80% on moderately heavy volume. GDX printed a "bearish engulfing" candle on the day, and looks like it might well have put in a top for this cycle.
Intraday, the behavior of GDX was curious – at the open, gold was still up perhaps $6 and silver was trading around $17 and change, up almost 0.50 on the day, a huge move. Yet GDX sold off from the opening bell. This very bearish behavior surprised me – the best I could figure is that AUY (Yamana Gold) issued a big bunch of new shares after market close yesterday, and that served notice to the rest of the senior miners that dilution was a possibility for all of them. Given the low price of gold, miners are starting to print shares in order to stay afloat. Here's what that share print-fest did to Yamana's share price – ouch:
SPX had a very volatile day – at first rising almost 30 points, only to lose it all and then some around mid-day, recovering some of its losses into the close. SPX closed down -5.23 to close at 2023.03. The excitement sent the VIX up +0.96 to 20.56. SPX continues to look weak.
Long bond ETF TLT was unchanged on the day; it made a new high intraday when SPX sold off, but sold off into the close. JNK closed off -0.10%.
The overall commodity index ($CRB) continued lower, dropping -0.51%. Part of the drop came from the dramatic collapse in copper, which dropped a huge -4.37% [-0.12] to 2.61 just today. Copper prices haven't been here since 2009 – although the drop in copper is still mild when compared to oil. To me, copper is about China; the chart below says China is on a steady path to buy fewer raw materials. The news stories may talk about various stimulus packages, but Dr. Copper is telling a relatively consistent story about reduced construction – it is another deflationary puzzle piece. Copper: down 20% since July 2014.
Oil actually rallied today, marking a new low but rebounding to close up +0.40 at 46.11, printing a doji-ish candle on very heavy volume. This is a reversal bar and may mark a low – however since we've had five of these during oil's long downtrend, I'm not opening the champagne just yet. Confirmation required: a close above today's high at 46.79.
Today was a very eventful day with prices moving strongly but pulling in different directions – silver was a star, copper collapsed, oil looks like it might rally (no, really!), and the mining shares were sold hard. Sometimes the market just challenges you to make sense of it all.
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