PM Daily Market Commentary - 8/10/2016

By davefairtex on Thu, Aug 11, 2016 - 4:11am

Gold rose +5.80 to 1347.50 on moderate volume, while silver rose +0.35 to 20.22 on heavy volume.  A sharp drop in the buck encouraged both metals to rally, however both metals retreated from their highs by end of day.

When gold opened in Asia, it moved steadily higher as the buck fell; at one point just prior to the US market open, it was up almost $17.  However once the dollar stopped dropping, gold immediately started selling off, and it ended up closing not too far from where it started.  Gold seems quite sensitive to currency moves right now.  All of gold's move today was a currency effect.

Gold did manage to close back above its 9 EMA, but the candle print was a bearish-looking shooting star, a classic "failed rally" candle print.

Gold open interest rose by +1151 contracts today.

Silver finally printed its swing low today, and also managed to move back above the 9 EMA.  Silver managed to hang on to more of its gains, as evidenced by the candle print, which was a spinning top rather than a shooting star.   Volume was pretty good, and silver strongly outperformed gold, which caused the gold/silver ratio to fall by -0.82 to 67.03.  Possibly silver was helped by a fairly decent rally in copper.

Both miner ETFs made new highs today just after the open, but then sold off somewhat as gold fell.   GDX was up +1.76% on moderately light volume, while GDXJ rose +1.70% on moderate volume.  It wasn't exactly a failed rally - just the gap up was partially sold.  Candle print was a relatively innocuous spinning top.  Miners clearly outperformed the metal - the GDX:$GOLD ratio made a new high today as well.  Miners are just chugging higher slowly, one might almost say relentlessly.  You can't really argue with a series of new highs.

Platinum rose +2.00% and made a new high, palladium shot up +4.62% and also made a new high, and copper managed to rally also, up +0.98%.  Like silver, copper gave back much of today's move, but it still managed to print a bullish engulfing candle pattern as well as a two-candle swing low; 37-53% chance of marking the low.

The USD was hit relatively hard, dropping -0.52 to 95.61.  After today's move, the buck has now given back all of its gains from the bullish payrolls report last Friday.  This has pulled the buck below the 50 MA; it has yet to make a new low, but it is definitely weakening.  Nobody appears to be worried about rate rises from the Fed.

WTIC was hammered today, dropping -1.26 [-2.95%] to 41.49, the losses coming shortly after the key Petroleum Status report at 10:30.  The report showed a minor crude inventory build, and a somewhat larger gasoline draw, but the details are not important; what mattered was the wave of selling that followed the release.  Candle print today was a two candle swing high, a 40-52% chance of marking the top.  Today's drop took oil back below its 9 EMA.   I still believe the COT report is telling us that a low is near, but we may have to re-test 40 before prices start moving higher again.

SPX fell -6.25 to 2175.49, printing a very mild swing high (20-33% chance of marking the top).  Mostly the drop was about energy (XLE:-1.09) and financials to a lesser degree (XLF:-0.79).  That said, I can't help but notice that Deutsche Bank (DB) made a low six days ago, and it has been on a minor tear since then (DB:+15.3%).  In fact, DB appears to be in the process of forming a bullish double-bottom pattern.  I'm not a buyer, but if the double-bottom pattern completes, it is generally bullish.   I'd take it as a sign that the rescue of the Italian Problem Child Bank (BMPS) is perceived to be working, at least for now.  VIX rose +0.39 to 12.05 as a result of SPX swing high.

TLT rose +0.39%, breaking above its downtrend line.  Bonds appear to be moving back into a short term uptrend.  That's risk off.

JNK fell just -0.03%, more or less going nowhere.  Not a bad performance given the sharp drop in oil.  We'll say risk on.

CRB fell hard, losing -1.04% and dropping through its 9 EMA.  Our brief commodity uptrend appears to be over.

The dollar has given back all its Nonfarm Payroll gains: "we don't believe in any rate rise." If the buck continues to drop, that should support PM, although gold's shooting star candle doesn't exactly engender a ton of confidence.  Miners should continue to do well.  If copper's swing low holds, silver might end up making new highs before gold does.

Based on the performance of DB, it looks as though the immediate bank problem in Italy has been "resolved" at least for now, although how 2.1 billion Euros can fix a 360 billion Euro problem remains a mystery to me.

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