PM Daily Market Commentary – 7/24/2014
Gold closed down -10.50 to 1294.20 on heavy volume, and silver was down -0.53 to 20.42 also on heavy volume. PM finally resolved the whole volatility squeeze uncertainty by breaking down hard, with silver [down -2.55%] hammered much harder than gold [down -0.80%].
So why did gold get hit less hard? Intraday the assaults happened at the same time, and both had heavy volume, but the spikes down on gold were much smaller, the bounces back more significant, there was support at gold's 200 MA, and by end of day some buyers came in to push gold back up to its 50 MA. It was just tough slogging for the shorts with gold. A lot of long stops were hit and they did manage to push gold below its previous low, but not a lot of price change happened.
Silver did not fare as well. Intraday, the spikes down were larger, the rebounds weaker, and silver even had an extra leg lower in the afternoon which took it right down to its 200 MA where it finally found support. Silver had a small bounce into the close, but it wasn't very substantial. The fact silver closed below its previous low is also a bad sign. This whole event moved the gold/silver ratio into bearish territory.
The USD moved higher yet again, closing up +0.06 to 80.94. The dollar is getting to be overbought, and at some point – perhaps soon – we should expect a drop in the buck, and maybe that will take some pressure off PM.
GDX closed down -1.55% on moderate volume, while GDXJ was off a larger -3.21% on heavy volume. The repeated larger drops in GDXJ are now starting to add up. We can see in the chart below that GDXJ has broken below its previous low, and that signals the correction is still in play. A lower high followed by a lower low defines a downtrend; GDXJ is in one, as is silver. GDX has not yet dropped below its previous low just yet. Traders appear to be hanging on to most of their senior miners, and selling a few more of their juniors; combined with the heavy losses in silver, we are starting to see a "risk off" profile developing for PM.
Another all time closing high for SPX today, closing up just +1 to 1988. As breakouts go, its not particularly vigorous. VIX rose to 11.84.
Long term treasuries (TLT) dropped heavily, closing down -0.75%.
Brent crude was off -0.96 to 107.07; its up one day, and down the next, remaining in its trading range.