PM Daily Market Commentary - 8/22/2016

By davefairtex on Tue, Aug 23, 2016 - 1:02am

Gold fell -2.30 to 1339.20 on moderate volume, while silver was hit for -0.45 to 18.89 on heavy volume.  Silver was pounded literally at the open in Asia by one of those designed-to-move-the-market spikes lower.  The spike successfully drove silver through 19.25 support - a 40 cent drop in 1 minute.  Surprisingly, gold mostly didn't follow silver lower.

Gold sold off a bit today, tugged lower mostly because of an intraday dollar rally.  When the buck sold off later in the day, gold recovered, regaining most of its losses.  Gold was almost entirely unaffected by the big drop in silver.  This is surprising, and I interpret this to be relatively bullish for gold.

On the chart, we see that gold's intraday drop pierced the uptrend line - that's not great, but it did manage to find support on the 50 MA.  Candle print was a "spinning top" - it looks like a more bullish takuri line, but the trading range wasn't large enough to qualify.  Volume was not particularly heavy - it was generally an uneventful day for gold.

Gold open interest fell by by -5,167 contracts today.  Perhaps - commercial short covering at work?

As mentioned, silver was pounded through 19.25 support/the 50 MA in the first minute of trading, and never managed to meaningfully recover.  Volume was heavy.  We can see on the chart that the volume has been steadily increasing - usually during a downtrend, this is bearish, as it suggests that more and more longs are bailing out.  The only time that volume is bullish during a downtrend is when a reversal bar is printed.

Next support for silver is around 18.  Today's "opening black marubozu" candle print is not very bullish; most likely, silver will continue to drop.  Candle code says it is a less than 20% chance this marks the low.

Miners had a bad day, pulled lower because of the large drop in silver.  GDX fell -1.67% on moderately light volume, while GDXJ dropped -2.22% on moderate volume.

On the chart we see GDX printing a "gap down doji" candle pattern - which sometimes forms a low, but probably not this time (15-20%).  Volume was relatively low; low volume dojis mostly suggest "things will continue on their current path."

It is possible we might see some support at the 50 MA.  Last time GDX had a sizeable correction, the 50 seemed to bring out the buyers.  It could do this again, but most likely that only happens if silver can find a low in the next few days (i.e. if 18 support holds).

Platinum fell -0.91% and made a new low, palladium dropped -2.16%, while copper fell -1.38% on some heavy volume.  Copper also made a new low today as well.  The metals aren't looking so great right now.

The USD rose +0.01 to 94.46, after first rallying as high as 94.94 intraday.  That's a failed rally - the buck's chart continues to look bearish, which is fortunate for gold.

Crude fell today, dropping -1.65 [-3.38%] to 47.10; I've been saying for a few days that crude probably needed to take a rest.  This was a bit more than that - it was big move lower, and the candle print was a two-candle swing high, but my code isn't that impressed; 30-47% chance it is the high.  That's not great, but its not as bad as I had feared after I watched oil sell off all day long.  We have the API report tomorrow, and the petroleum status report coming on Wednesday.  If we get a bullish status report, today's drop (and, likely, tomorrow's drop as well) could just be a pause on the way to 50.  It will depend on the market's reaction, of course.  If it reacts badly to the status report, we might drop all the way back down to 40 again in a hurry.

SPX fell -1.23 to 2182.64 in a very narrow trading range.  Not much happened today - the most exciting thing was energy which fell (XLE:-1.15%) because of the big drop in oil.  VIX shot up +0.93 to 12.27.  That's a big move in the VIX given that nothing significant happened overall.

TLT also shot higher, up +0.84%, moving back above its 9 EMA.  TLT has been chopping sideways, but along with the VIX rally, its a curiously large move.  Risk off.

JNK fell today alongside oil, dropping -0.22%.  It wasn't a move of much consequence, but it hints at risk off.

CRB fell -0.90%, pulled lower by falling energy and industrial metal prices.

The commercials took silver through support today, but gold did not follow, showing an unusual resistance to being pulled lower.  This suggests to me that the bid under gold is stronger than I had anticipated.  Miners also avoided selling off hard.  Except for silver, the correction is fairly mild, as these things go.  Even the silver miners are more or less resisting the move lower.  So far anyway.

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