PM Daily Market Commentary – 10/21/2014
Gold closed up +2.30 to 1249.70 on moderately heavy volume; silver was up +0.08 to 17.50 on moderate volume. Gold tried rallying twice today at one point hitting 1255.60 and breaking through its 50 MA, but it failed to hold onto its gains and sold off into the close, printing an inverted hammer on the day. Silver for once outperformed gold.
The inverted hammer candle print coming at the end of a 3 week move higher may be a sign that gold is getting a bit tired and needs a rest. Likely, what gold does depends on the dollar. If the buck continues to rally, gold will probably correct.
The dollar dipped lower in Asia trading, and then reversed, climbing strongly for the remainder of the day, closing up +0.38 to 85.43. The +0.45% move in the buck definitely caused heartburn for gold, with gold dropping as the dollar rose intraday.
Mining shares opened up, and then sold off slowly all day long. GDX was off -0.47% on light volume while GDXJ dropped only -0.03% also on light volume. Mining shares are currently straddling their EMA-9, trying to decide whether to rise or fall.
Traders pushed SPX over 1905 resistance in the futures markets in London trading, and once NY opened the buying just kept on going. SPX closed at the highs of the day, up a big +37.27 to 1941.28 on some pretty decent volume. VIX dropped -2.49, and is now at 16.08. If you are imagining you want to short this market, its probably best to wait for the market to hit a wall before jumping in. So far, the market has just been going straight up.
Long term treasuries (TLT) sold off, dropping -0.80% and are back below the EMA-9. The strong equity market seems to be sucking money out of bonds. JNK is slowing down, up only +0.42% today, but it did manage to make it through its 50 MA. If JNK is the "tell" for SPX, we might expect to see SPX slow down tomorrow.
Commodities had a good day today, up +0.65%. WTIC dropped -0.17 to 82.55, and Brent rallied +0.82 to 86.22. Energy shares blew through their EMA-9, rising a big +3.04% today. Energy shares have done quite well over the past four days, and that is suggesting to me that perhaps the oil downtrend may be nearing an end.
The market today is a complicated picture with lots of moving parts. It looks like money is sloshing from stocks to bonds and back again, out of oil and now possibly back in. Gold has had a stealth move higher, up 70 points in 3 weeks while the dollar has been slowly dropping. Where to from here? Once again, I think it depends on the buck – and that hammer candle in gold tells me traders may be a bit nervous about renewed dollar strength.
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