Hammered back down, again.

jmski52 · October 23, 2015 1:18AM

It's almost comical when this happens, and it's worth noting a few points.

Today's initial reaction to China's interest rate cuts were what I would consider to be normal market moves. There was a rush into stocks and other assets (including gold), but mainly into stocks as you might expect when there is a race to the bottom in currencies. China has joined the race to the bottom. Ultimately, this means a currency devaluation worldwide which always gives impetus for owning assets. Gold is also an asset, albeit not a paper claim on some company's future earnings.

Caterpillar is a fairly good proxy for worldwide industrial activity, and Cat has been having a run of poor results for some time now. The large banks can always suck money from the Fed for free, so they're doing alright. Tech and Big Pharma are overvalued as usual even when earnings suck. Gold just sits there with no counterparty exposure. Good enough.

So today, everything jumps. Then oil and gold take a dive. If the dollar is disengaging from petrodollar status, that's a downward influence for the dollar, not an upward influence. However, China's joining the race to the bottom in currencies automatically pumped up the dollar when people across the globe realized what China's devaluation meant. At this juncture, there's still nothing more liquid than the US dollar but there's also been a move afoot to get away from the dollar for some time now.

Why then, did gold drop? Because China devalued the yuan? Hardly. Because the dollar reacted to the yuan devaluation? Hmmmmm. Hard to say. Because oil also took a dive at about the same time? Your guess is as good as mine.

jmski52 · October 23, 2015 1:19AM

What? No paragraph breaks? What gives?

mariner67 · October 23, 2015 1:38AM

We all know it is because "they" are manipulating the markets!

.....hey, how do you add the smile icon now?

Justacommeman · October 23, 2015 1:41AM

Select Tech and big pharma are having sensational earnings and guidance. Money should be flowing into those stocks.

mark

Justacommeman · October 23, 2015 10:42AM

I'll add that GDX was up 2.5% today. Great day for the gold miners.

mark

roadrunner · October 23, 2015 12:34PM

GDX was whipsaw central today. You could have sold-bought-sold it today on multiple large swings.

The COT positioning shows 18 month extremes in silver with gold not far behind. Unless we're now in a new PM bull market (it's possible), then these kinds of levels have soon led to stiff corrections for the past 4 years. The commodity sector is once again under pressure while the Euro, Yen, Cdn, and Aud have been crushed again. Not the best recipe for continued PM bullishness, especially with OpEx next Tuesday and an FOMC meeting. Maybe it's a big head fake to convince the bulls to fold. While miners look "strong," gold and silver really don't. Once again gold is sort of capped below the $1170 level. That level was strong resistance for much of the past 3 months. GSR is just recently coming off a rather lengthy 6 week decline. Usually, there's a more time to mark before its next peak. The GSR gap above current levels from 75-77 would seems to be a reasonable place to retrace up to.

Another interesting move is the nearly -$600 MILL in miner's being sold off this week (see WSJ Selling on Strength list). Those kinds of massive levels haven't been seen since the Sept 2nd/4th 2014 huge Buying on Weakness numbers. What makes it interesting is that the Sept 2014 BoW resulted in a multi-month crash (ie head fake). I guess it's possible the current SoS numbers could be a set up for a head fake as well. A dozen or two big cap stocks joined GDX on the SoS today with the banks being well represented. I'd certainly welcome PMs going higher to address the next set of higher gaps in the $1180's and even around $1205. But, there are a lot headwinds currently in play. I'm still figuring gold needs to retrace to at least $1142-1154 to fill older spot gold gaps from the last rally. The lowest gap is at $1134. When I weigh all the current + and - items for PMs, the negative side is well ahead. If Monday is a down day for miners I think that would seal the deal for next week.

I think SLV and SIL represent what I'm seeing better than GLD or GDX. SLV blew through resistance to reach an elevated upper price channel. It has since retested cloud resistance, bounced back up into the mid-channel, short term moving average resistance. Those last 2 lower big gaps look very inviting. Money flow index recently peaked. Still, won't rule out another move higher to recover Monday's gap down.

SLV chart

Newmont just today tagged the top of its resistance cloud, lagging the general sector. It also showed up on the SoS list today at -$10 MILL. If it can get well above the cloud next week that would be a very positive sign for the sector. It does look like it has been trying to slowly turn around for the past several months. It's movement through resistance has been picture perfect so far.

Newmont chart

cohodk · October 24, 2015 7:19AM

Roadrunner, you make drawing stick figures complicated. Just follow KISS.

Baley · October 24, 2015 10:57AM

Gold just sits there ... Why then, did gold drop?

If gold was a boxer, it would just hold its gloves in front of its face and it's elbows against its ribs. If gold were a quarterback, it would take a knee on every play. If gold was a poker player, it would only check and fold, never raise.