PM Daily Market Commentary – 4/13/2015
Gold fell -9.50 to 1198.50 on moderate volume, while silver plunged -0.23 to 16.25 on moderate volume. Intraday, PM just seemed weak; it was less about currency and more just about no buyers showing up.
The miners had another light selling day, with GDX off -0.98% on light volume, while GDXJ dropped -1.89% on moderately light volume. Mining shares sold off steadily all day long, but the low volume suggests a lack of buyers more than a large amount of selling pressure.
The dollar climbed +0.17 to 99.77, cresting 100 at one point but then falling back. The buck printed a doji on the day, which is suggestive of a potential reversal. Right now, 100 appears to be resistance for the buck. If the dollar breaks to new highs, gold will most probably have a bad reaction.
SPX tried to rally and failed, first rising 5 points, and then selling off to close down -9.63 to 2092.43. SPX may have marked a swing high – tomorrow we need a close below today's low to complete the pattern. Tomorrow also has the important Retail Sales release at 0830 EDT; this release an hour before market open could prove decisive in determining direction. The VIX rose +1.38 to 13.94.
There have been rumblings around the subject of consumer credit of late; the consumer revolving credit timeseries shows a modest drop (once adjusted for seasonal variation) while others (http://globaleconomicanalysis.blogspot.com/2015/04/credit-crunch-underway-can-recession-be.html) have pointed out some more major-sounding issues with credit issuance. Credit growth is a very driver of economic growth; changes in credit availability will affect things like retail sales directly. Consensus is for Retail Sales to grow in March. If it disappoints, my guess is that SPX will sell off directly.
Bond ETF TLT rose +0.14%, remaining in a zone above the 50 MA but below the 9 EMA. The pattern TLT is showing still suggests a short term correction, but if SPX marks a swing high, my guess is that will change rapidly. Money will flow from stocks to bonds and TLT will rally.
The CRB (commodity index) fell -0.13%; given the buck rose +0.18% the modest drop is not entirely unexpected. Commodities are still looking bearish, but at least the CRB's 50 MA has started moving sideways rather than down. Its a first very modest step towards a recovery.
WTIC climbed +0.20 to 51.99. Oil is managing to stay above both its 9 EMA and its 50 MA, which is bullish if it can continue to do so. Oil really needs a close of around 55 to confirm its double bottom. The EIA's new data release today projects a top in shale production by the end of April, with a -56k bbl/day production decline in May. We are well below break-even in rig counts, so once the decline starts, it should persist.
We are still awaiting directional information from the markets, especially in equities and bonds. Oil is looking cautiously better, silver is correcting, and gold is splitting the difference, try to decide which way it will go.
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The Retail Sales release at 0830 EDT seemed to be reasonably positive to me, but the USD sold off really hard immediately after release. Right now, the buck is down -0.99, which has caused gold and silver to rally off its lows (they had been dropping right up until 0830 – and were down around 1% immediately prior to the release).
The equity market rallied initially, and then sold off, but now its rallying again. So far it looks like "no material effect."
Its unclear if the buck was reacting to Retail Sales, or the PPI (an inflation measure, which suggested inflation effects are almost nonexistent – possibly little reason for the Fed to raise rates).
Buck's tumble should be good for gold. I'm not sure if this gives us any direction for equities. INDPRO tomorrow. That probably won't be so positive – shale drilling slowdown won't help INDPRO at all.