PM Daily Market Commentary – 8/5/2014
Gold closed up +0.40 to 1289.60 on moderately light volume, while silver was off -0.39 to 19.78 on heavy volume. While gold took a modest dip down, found support at 1283 and then recovered closing even, silver was just sold hard all day, starting after 0700 EDT and not ending until the market closed.
While gold is still trending lower (it needs to break its downtrend line in order to remedy this condition), it does seem to be finding support. That, or there aren't many traders interested in selling once prices drop to 1280.
The silver chart looks much more unhappy right now; the divergence between gold and silver started 3 days ago. Volume is increasing as we drop, so is the velocity of the price move, we've seen down days for 8 of 10 days now, and silver has broken the support of its two main moving averages. We need to see some buying soon, or we will end up re-testing 18.75. This remarkable recent divergence between gold and silver is a strong "risk off" signal for PM, and it has caused the gold/silver ratio to rocket higher; just today it was up +1.28 to 65.20.
The USD rallied strongly, closing up +0.21 to 81.60, scoring a new closing high today. So much for the hoped-for rest in the dollar. The rising dollar is definitely contributing to weakness in PM.
The miners diverged sharply from PM, but in a positive way today. GDX closed up +0.58% on moderate volume, while GDXJ moved up +1.60% on heavy volume. As gold dropped early, miners followed, breaking below their trading ranges today, but they rallied once gold found support at 1283. From watching the intraday moves, it appears that the mining shares really are looking for an excuse to rally. As soon as gold found any strength at all, the mining shares took off – with even many of the silver mining shares doing well today in spite of silver's plummet. Another positive sign was that miners did not follow equities lower when SPX took its drop; sometimes they do that, but today they did not. If PM can find any support at all, I suspect mining shares will do quite well.
SPX was hit hard in the afternoon, closing down -19 at 1920, briefly moving below Friday's low. This is bearish; just a few weeks ago, yesterday's rally would have resulted in SPX moving back on a steady path to a new all time high. Intraday there did not look to be much enthusiasm for a continued move lower once the new low had been made, but neither was there any strong buy-side support. With down-day volume exceeding up-day volume, things definitely look bearish for SPX.
Long term treasuries (TLT) rose +0.32% today – equity's loss has now become the long bond's gain: intraday, the long bond started rising when equities tumbled.
Crude oil dropped again – Brent was down -0.80 to 104.61, and WTIC was off -0.82 to 97.58.
This brings me to your chart of the day: gasoline. It has had a bad few months, but we may have found a low at 2.73. Wouldn't it be nice to buy your gasoline at this price? Unfortunately, you have to buy 42,000 gallons at a shot, and you end up getting "Fungible F Grade, Reformulated Regular Gasoline Blendstock (RBOB) for blending with 10% Denatured Fuel Ethanol (92% Purity) as defined in ASTM D-4806 as listed by the Colonial Pipeline as being properly designated for sale in New York and New Jersey in accordance with EPA
regulations." Federal and state tax not included, received from either barge or pipeline as per NYMEX chapter 191: http://www.cmegroup.com/rulebook/NYMEX/1a/191.pdf