PM Daily Market Commentary – 7/23/2014
Gold closed down -3.40 to 1304.70 on light volume, and silver was down -0.06 to 20.95 also on light volume. Volume and trading ranges for both metals are shrinking every day, which is a trading pattern known as a volatility squeeze. It sounds unpleasant, but it really just reflects trader uncertainty as to market direction. This pattern often ends in a big move – in either direction.
The USD moved higher again today, up +0.04 to 80.89. Over the past 10 trading days, the buck has been up 9 days. Last week we saw a golden cross for the dollar, as its 50 MA crossed over its 200 MA to the upside. In the medium term, the dollar is now looking stronger; this should lead to money flowing into US assets, and at least some pressure on the price of gold.
So if we look to the miners for direction – GDX was down -0.38% on light volume, while GDXJ was down -1.31% on moderate volume. GDX:$GOLD still looks strong, while GDXJ:GDX is starting to fade a bit, dropping below its 20 EMA just today. Gold/silver ratio continues looking bullish. So with 2 of 3 ratios looking bullish, our miners are currently suggesting things still seem ok, although GDXJ:GDX is starting to weaken.
Another all time closing high for SPX today, closing up +3 to 1987. VIX dropped to 11.52. VIX has been a decent buy (for a trade) on moves below 11, but we're not there just yet.
Long term treasuries (TLT) dropped a bit, closing down -0.13%. 20 year US Treasury rates are now at 3.00%.
Brent crude was up +0.70 to 108.03 – still trading sideways within its 107-108.50 trading range.
Gold broke through support this morning – the previous low of 1292.60 – flushing a number of longs. If we can get back above 1300 today, this could mark the low. Otherwise odds are we'll probably drop a bit more until we hit support at 1280.
Lets see if the buyers at COMEX appear on this morning's move down.
If gold does break down further [uh, it just did – what great timing] if you are in the market to pick up some mining shares, you might start making your list of stuff you'd like to buy once we see a reversal.