PM Daily Market Commentary – 1/26/2015
Gold fell -12.80 to 1281.30 on moderately heavy volume, while silver dropped -0.39 to 17.93 on moderately light volume. The metals sold off steadily, starting late in the Asia session through London. It appears that the Syriza victory was already baked into the gold-price cake, and so the election ended up being a sell-the-news event.
Still, gold remains above the EMA-9, which has acted as support during gold's rally over the past three weeks.
The USD closed the day flat; it rallied strongly right at the open in Asia, but then sold off for most of the day, retreating back to even. On the other side, the Euro hit a new low of 110.96 early in Asia, and then rallied throughout most of the day. It is possible we could have a Euro rally here. There are a lot of Euro shorts/Dollar longs – I'm not suggesting a trend reversal, but the Euro has fallen a very long ways in a relatively short period of time.
Miners turned in a strong performance today, with GDX rallying +1.89% on moderate volume, and GDXJ up +2.68% on moderate volume also. Mining shares opened lower because of the drop in gold overnight, but rallied strongly for the whole day, closing at the highs. This caused the GDX:$GOLD ratio to rise substantially, and even GDXJ:GDX is looking slightly better. This was a surprising and bullish outcome on a day when gold sold off and commodities continued falling.
SPX sold off in the morning, but bounced back and by end of day it closed up +5.27 to 2057.09. SPX remains above its 50 MA, and on balance it appears probable that it will re-test the highs in the near future. VIX dropped to 15.52.
Long bond ETF TLT dropped -0.30%, staying within its recent consolidation range, and remaining above its EMA-9. Bonds have not yet corrected – sometimes when there is enough buying pressure, no correction happens after a breakout, and instead things just chop sideways for a time before breaking higher once again. JNK broke higher, up +0.59%. It is now comfortably above its 50 MA, having broken through one of its resistance zones. It will be interesting to see how JNK fares after the Q4 2014 earnings reports from the shale companies, coming in early February.
The overall commodity index ($CRB) dropped again, off -0.26%, making yet another new low. WTIC fell as well, attempting to rally, failing, making a new low and closing down -0.21 to 45.08. WTIC at 45 means Bakken players get about 35. Nobody makes money at those prices.
Greek elections were a sell-the-news event, but not dramatically so. GDX seems to have a bid, and that's reassuring for PM. It suggests to me that the drop in PM may not be too substantial. Possibly, that's due to the anticipated debt resolution discussions – the net outcome I think will most likely be quite gold-positive. As of this moment, I don't see the Eurozone going for the Greek Default option which would lead to a big deflationary outcome. The chatter I am hearing is one of general support for a zone-wide negotiated debt resolution.
If you are interested in the starting position of Syriza in the upcoming negotiations, you can read an overview here (https://euobserver.com/news/127115) or the paper itself here (http://www.levyinstitute.org/pubs/wp_819.pdf). Long ago as an undergrad, I was urged to always read source documents versus summaries and opinions. I urge you to do so now, in that same spirit.
Although the authors of this paper frame things in terms of class struggle, I believe they have some very strong points to make…if you are patient and are able to wade through all the marxist jargon, perhaps you will see it too.
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Euro rallying strongly this afternoon in London – so far its up +1.22%, which has driven the buck down -0.85, apparently marking a swing high in the buck, if we close at these levels.
US equity market doesn't seem to like the Euro rally very much.
Isn't it interesting how the Greek elections marked a low in the Euro? Once the elections happened, there was nobody left to sell. From what I can see anyway.