PM Daily Market Commentary - 8/3/2016

davefairtex
By davefairtex on Thu, Aug 4, 2016 - 5:17am

Gold fell -6.10 to 1359.70 on light volume, and silver dropped -0.22 to 20.44 on moderately light volume also.  As with yesterday I blame (credit?) the buck, which staged a decent rally; that helped pressure gold and silver into a loss.

Percentage-wise, the dollar rally was almost identical to the fall in gold - gold in Euros was actually up.  Once again, gold's move was largely a currency effect.

Gold was not able to make a new high today; a small wave of selling started just after 08:00 Eastern.  I didn't see any sort of economic report released then, but gold took a $10 hit during that time, and volume during that period was fairly heavy.  Perhaps it was the commercials looking to force prices lower, but if so they had help from the dollar, which rallied all during that timeframe.

On the chart we see a short black candle print, on low volume.  It looks as though it could be a more ominous "dark cloud cover" pattern - but today's candle did not open above yesterday's high, which is required.  My code suggests today's pattern is not a big deal.  The low volume tends to support this as well.

Gold open interest increased by +10,844 contracts today.  This would tend to support the "commercials selling at resistance" theory.  In some sense, this is what resistance is all about.  Shorts appear to sell the high, and the longs need to come up with some extra force to push past all the selling.

Like gold, silver did not manage to make a new high today.  Silver didn't perform nearly as well as gold, printing a "bearish engulfing" candle pattern, which can be bad news in some circumstances.  This situation doesn't look so bad - only a 17-30% chance of a top.  Possibly the low volume contributed to the somewhat ho-hum nature of the risk assessment.

Silver was close to printing a swing high also, but avoided it by a few pennies.

Both miner ETFs fell today, with GDX off -1.21% on moderately light volume, and GDXJ fell -0.79% on light volume.  Both printed two-candle swing high patterns, which can be dramatic - but these were not, with the code assigning a 20-27% of this being the high.  The swing highs were about as lame as they come, ranking in the bottom 5-10% of instances.  Perhaps it was the light volume, or the very modest drop.  Miners remain above their 9 EMA.  Unless gold falls apart, its probably nothing to worry about.

Platinum fell -0.21%, palladium dropped -0.54%, and copper lost -0.48%.  Copper is in a pretty clear downtrend at this point having closed below its 9 EMA for the past three days.

The USD rallied back today, closing up +0.54 to 95.53, stopping just under its 50 MA.  The rally regained about 2/3 of yesterday's losses, and the candle print was a "bullish harami" - just mildly bullish, with a 25-32% chance of being the low for the buck.   Where the dollar goes, likely gold moves in the opposite direction, at least for now anyways.

WTIC finally rallied, up +1.45 to 41.17 [+3.65%].  Oil printed a relatively enthusiastic bullish engulfing candle pattern, a 40-48% chance of marking the low.  The high volume and the large white candle print support the case for a reversal.  Oil is now back over its 200 MA.  Most of the gains came following the petroleum status report, which although it showed a bearish crude oil inventory build, also showed a much more bullish gasoline inventory draw.   Oil equities (XLE:+1.93%) may be confirming the low in oil by printing a relatively high percentage two candle swing low: 59-65% chance of marking the low for oil equities.  The bid underneath many of the oil E&P companies is almost as good as the one underneath the miners.

SPX climbed +6.76 [+0.31%] to 2163.79, mostly on the strength of the energy rally.  While the move higher in SPX doesn't look all that exciting, if the oil rally starts to take off, it will probably drag SPX right along with it.  VIX fell -0.51 to 12.86.

TLT rose +0.06% - not much change.  Bonds remain below their 9 EMA, and appear to have moved into a downtrend.  Bonds appear to have printed a lower high.  The weekly chart still shows an uptrend, but it is weakening.

JNK rallied +0.34%, printing a bullish tasuki line candle pattern - only somewhat bullish, at 24-29%.  JNK is still below its 9 EMA but it is hinting at risk on, and longer term it remains in an uptrend.

CRB finally managed to rally today, up +1.39%.  CRB is back above its 200 MA, but has not yet printed a swing low.  Most commodity elements rallied today - in fact, everything rallied except PM.

Oil may have put in a low, call it a 50/50 chance.  Right now, gold and oil have a rough inverse correlation; when oil rallies, gold tends to drop.  Over the long term this is generally not true, but right now, I suspect if oil rallies, gold might find itself under pressure.  But the pressure does not look to be too severe, at least right now.  The buck plays a role too for sure.  So far, the selling in PM looks innocuous enough.  And again, this is summer, when trading is light and many people are on vacation.

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