PM Daily Market Commentary – 8/4/2014
Gold closed down -6.00 to 1289.20 on light volume, while silver was off -0.16 to 20.17 on moderately light volume. Gold did not confirm the possible rebound from Friday; although volume was light, the lack of buying follow-through from Friday's rally is bearish. Silver is starting to break down more rapidly; buyers are definitely more scarce in silver than in gold.
Silver's drop below its 200 and 50 MA is also a bearish sign.
The USD dropped slightly, closing off -0.03 to 81.39. After moving up 2.5% in July, the buck appears to be finally correcting, although so far the correction has been modest. Any drop in the buck should help gold to find its footing, although it needs to be more than a few points to have a material effect.
GDX was off -0.95% on moderate volume, while GDXJ dropped -3.49% on heavy volume. While GDX dropped significantly less than the juniors today, both mining ETFs are quite near the bottom end of their trading range, and are both threatening to break lower. The junior miners are starting to look particularly weak, with a pattern of distribution starting to appear.
The gold/silver ratio has moved into bearish territory, as has GDXJ:GDX. GDX:$GOLD is the most bullish signal, and even it seems to be fading a bit. Right now, I'm not seeing much buying in the PM complex. Gold perhaps looks the strongest, after showing some support at 1280 but it is the miners and silver I look to for directional leadership, and right now they appear to be leading us lower.
SPX rallied off Friday's almost-doji, closing up today +14 to 1939, confirming Friday's low. This caused the VIX to plummet, dropping to 15.12, which is still somewhat elevated in terms of recent levels. Buy the dip is not dead. Now it is important to see how SPX performs at resistance points, such as its 50 MA (1954) which happens to be its former support area too. An obvious place to re-enter short would be around that level.
Long term treasuries (TLT) faded a bit, dropping -0.26%. They seem unsure as to their direction, although the drop today mildly supports the SPX rally case.
Crude oil seems to be – at least for now – tied to SPX; both oil and SPX found a low last Friday, and both rallied today. The low volume in both rallies isn't particularly compelling.