PM Daily Market Commentary – 2/06/2014
Gold closed up +0.80 to 1258.50 on light volume, and silver closed up +0.07 to 19.94 on moderate volume. The gold/silver ratio dropped -0.17 to 63.09. PM traded mostly sideways within a modest trading range, with silver having a slight upward bias. Silver is now back above its 50 MA.
The USD closed down -0.15 [-0.19%] dropping into the middle of its recent trading range. Every time it looks like it wants to break above 81.50 and the 200 MA it has backed off.
GDX dropped slightly today, down -0.09% on light volume, while GDXJ was up +1.22% on heavy volume. Mining shares mostly tracked sideways today – really not much happened in the senior miners, while the juniors seemed to do relatively well.
US equities rallied strongly up +22 [+1.24%] to 1770-1775 resistance; this is a logical price level for shorts to enter. Likely a bunch did today, since the rally stopped more or less at resistance. Tomorrow we have the monthly Employment Situation report at 0830 EST. It could provide some news-driven movement in the futures prior to market open. This could give us a clue to the market's psychology – if bad news results in a rally, its quite bullish, and if good news results in a sell-off, then its quite bearish.
After the current resistance zone, a next logical short entry point is the 50 MA, which is falling and is currently at 1809. While we may think overall that "this is the big one and we're going down now", markets usually don't move in a straight line. Anyone shorting immediately after the big move down on Monday would now be underwater, and being underwater is no fun.
So the plan is, when the markets are going downhill – short the rallies. And use stops, in case the dip-buyers prevail once again – against all logic. It could happen.
It feels to me overall like PM is waiting to find its direction, with silver now having an upward bias at long last, and the miners are mostly tracking sideways. Is everything waiting on the equity market? The current linkage is, what's good for equities seems to be bad for gold.
Hopefully we'll get more information tomorrow.
Here's the latest "effective printing" chart – the one that gave Jim H a bit of heartburn a few months back. It has been an interesting few months since then. This chart shows a huge jump in the number of dollars leaking out from the Fed's printing operation. In fact, over the past month, almost every dollar printed ended up making its way out into the system somewhere, instead of sitting on deposit as excess reserves. That's 72.5 billion dollars looking for a new place to call home from January alone.
What caused this change? Where did the money go? I have no idea. I'm just reporting the data as it comes in.