PM Daily Market Commentary - 8/17/2016

davefairtex
By davefairtex on Thu, Aug 18, 2016 - 2:40am

Gold rose +2.30 to 1349.70 on moderate volume, while silver fell -0.14 to 19.70 on heavy volume.  Both metals sold off in advance of the FOMC minutes release at 14:00 Eastern, with silver dropping much more than gold.  Post-release there were the usual spikes in both directions, after which gold moved back into the green, while silver did not.

The FOMC minutes provided a bit more insight into the thinking of our central planners during their last meeting; the thumbnail sketch by Econoday summarized it as: "wait and see."  What a surprise - that's pretty much where they've been for the last 8 months.

http://mam.econoday.com/byshoweventfull.asp?fid=471660&cust=mam&year=2016&lid=0&prev=/byweek.asp#top.

...the bulk of the FOMC were content to wait and see, results that don't point to any sense of urgency for a September rate hike

On the chart, we see gold is in a rough uptrend, with gold above all 3 moving averages.  My computer saw this before I did, but now it is getting clearer on the chart.  Today's "high wave" candle doesn't say very much about direction.  When in doubt - trend continues.  Currently, that's up.

Gold open interest fell by -7,337 contracts today.

Silver underperformed gold again today.  Not only did the gold/silver ratio rise +0.37 to 68.65, but silver fell while gold rose, and silver's low today was uncomfortably close to 19.25 support.  On the chart we see silver forming a rough descending triangle.  Unlike gold, silver is below its 9 EMA, and the number of relatively high volume down days is increasing.  Today was no exception.

Candle print today was a "hammer" candle, which is a bullish reversal bar.  This one is just so-so, with the candle code giving it just a 25-30% chance of marking a low.  Silver remains in a downtrend.

Miners had a bit of a rough day; GDX fell -1.43% on moderately heavy volume, while GDXJ dropped -1.21% on moderate volume.  To me this seemed to be just about traders reducing risk prior to the FOMC minutes release.  I say that because the miners sold off fairly hard in advance of the release, and recovered much of their losses immediately after the release.

On the chart, this was a gap down open below the 9 EMA, ending the day with a "takuri line" candle print which is a bullish reversal bar.  Candle code gives this an average rating, with a 25-41% chance of being the low.  High volume on a reversal bar is generally bullish.

Do we imagine traders will buy the dip in the miners?  Probably.

Platinum fell -0.84%, making a new low, while palladium fell -1.90% dipping back below the 9 EMA.  Copper fell -0.92%, losing almost all of yesterday's rally.  Copper remains in a downtrend.  I suspect copper is having a bad influence on silver.

The USD fell -0.07 to 94.69.  It bounced around as usual right after the FOMC minutes release but ended up little changed on the day.  After the dramatic move yesterday, today's move was just a footnote.

WTIC rose again, up +0.57 to 47.11, moving higher following the petroleum status report, which showed a crude inventory draw of -2.5 mb, and a gasoline inventory draw of -2.7 mb.  Market liked the report, although there was some back-and-forth before it decided to rally.  Crude oil sentiment is not at excessively bullish levels, so this rally could continue to move higher, although the reluctance of prices to move rapidly higher after a bullish-looking status report might be signaling that the buyers are becoming more thin on the ground.  But aren't you glad you didn't pay attention to all the talk of a glut?  Price is now up $8 off the lows set 11 trading days ago.  Just think - what would you have done if gold had popped 20% in two weeks?

SPX rose +4.07 to 2182.22, printing a hammer candle on the day.  SPX initially sold off in the morning, but started bouncing back around noon, and moved back into the green by end of day.  Code rates the hammer candle about midrange, a 30-43% chance of being a low.  Traders bought the dip in utilities (XLU:+1.49%) today, printing a high-volume/highly rated "bearish engulfing" candle pattern (53-65% of marking the low).  Those dips in utility stocks don't last all that long - that's a 3.12% yield, after all.  VIX fell -0.45 to 12.19.

TLT rose +0.60%; about half of the gains came after the FOMC minutes release.  Over the past few months, TLT has been more or less chopping sideways.

JNK rose +0.16%; not much of a move, and it traded in a narrow range also.  Not much of a signal today from JNK.

CRB rose +0.14%, not quite able to move back above its 50 MA.  Energy led, as it has been doing for a few weeks now.

The FOMC minutes release was a non-event.  The central planners have been in a "wait and see" mode forever, but the market still seems to enjoy periodic reassurance that nothing has materially changed.  The sell-off in the miners prior to the release seemed to be a case in point; buying resumed after the all-clear was sounded at 14:00 Eastern.

Silver is starting to look more iffy.  The move down to 19.38 was a bit disturbing, so is the descending triangle pattern, and so is the bearish volume pattern.  We can possibly blame this on copper's four week downtrend.  Silver is hanging out in bad company, and given the bearish copper COT report, copper could spend quite a bit more time in a downtrend before it reverses; say 4-6 weeks, perhaps?

Gold continues to look reasonably strong when priced in USD; gold in Euros has fallen down to support and the 50 MA.  If support in Euros holds, gold should do fine.  If gold in Euros fails support, gold in USD could turn lower.

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