PM Daily Market Commentary - 9/1/2016

davefairtex
By davefairtex on Fri, Sep 2, 2016 - 4:33am

Gold rose +4.60 to 1313.00 on moderate volume, while silver rose +0.24 to 18.89 on light volume.  Gold made a new low, and was looking bearish until the ISM Manufacturing Index report (released at 10:00) unexpectedly showed contraction, for the first time since February.  The buck tanked, and gold and silver shot higher: bad news means no rate hike, and these days, its all about rate hike expectations.

Gold made a new low at around 08:30, after a jobless claims report looked fairly strong - but attempts to drive price lower ran into a wall of buying at 1306; several spikes lower failed, and once the sellers realized this, gold jumped higher as the shorts covered.  Then once the ISM manufacturing report hit the wires at 10:00, gold jumped higher still, eventually ending the day right at the high.  While the absolute price move wasn't all that large, it was a somewhat surprising outcome.  Candle print today was a low-rated bullish engulfing, 30-36% chance of marking the low.

Payrolls are tomorrow.  If we got this out of an ISM report, payrolls should provide all sorts of entertainment.

Gold open interest at COMEX fell by -2,145 contracts.

Silver did even better than gold; it avoided making a new low in the morning, rallied alongside gold on the release of the ISM report, and it even managed to close above the 9 EMA for the first time in 16 trading days.  That's better than a poke in the eye with a sharp stick.

Candle print today was an uninformative a spinning top; while silver has not yet broken above its recent trading range, the close above the 9 EMA is bullish, as is the fact it is outperforming gold; the gold/silver ratio fell -0.57 to 69.53.

Miners initially opened down, making a new low, but they rocketed higher following the ISM report at 10:00.  GDX rose +3.65% on very heavy volume, while GDXJ rose +4.77% on extremely heavy volume.  Both miner ETFs closed at or near their day highs.  Both ETFs printed mid-range bullish engulfing candles; 43-56% chance of a low there.  Compared to gold, you can see that the GDX "bullish engulfing" candle was a lot larger, and the volume was massive - that's probably why it got a higher rating.

Whether or not this marks the actual low will no doubt depend on how the payrolls report looks tomorrow, but today's move is a hopeful sign.  The miners are definitely ready to rally.

Platinum fell -0.44% making a new low, palladium dropped -1.23% making a new low also, while copper was unchanged.  Hmm.  I don't like the other PM items continuing to drop.  I'm not sure what it means, but I prefer them all to move in the same direction so I don't worry.  Copper is really trying to put in a low, but its rallies just keep failing.

The USD was up about +0.20 until the ISM report was released at 10:00.  Immediately after release, the dollar plunged, eventually closing the day down -0.35 to 95.61.  The buck printed a two-candle swing high, but the rating was feeble: only a 22-32% chance of marking a high here.  Normally those two-candle swing high patterns are in the 50-60% range.  No doubt the dollar's future will depend more on tomorrow's payroll report than the candle print from today.

Crude plunged again today, down -1.33 [-3.03%] to 43.53, making a new low - a follow-through from the bearish petroleum status report on Wednesday.  Oil did manage a feeble rally at end of day; the candle code says the long black candle marks the low 18-25% of the time.  I'm not holding my breath.  Unless we get some bullish news, we probably go lower again tomorrow.  Hmm.  XLE actually managed to rebound in the last 30 minutes of trading, ending the day down only -0.29%.  Same pattern for oil services.  Are they telling us that a low in oil is not far away?  Interesting.

SPX fell just -0.09 [-0.00%] to 2170.86, basically unchanged on the day.  SPX had been down 13 points earlier in the day, making a new low, but rebounded back to flat, printing a fairly highly-rated doji candle on the day (28-30% chance of a low).  That's high for a doji.  While SPX remains below its 9 EMA, the bears are having a great deal of trouble getting prices to move lower.  VIX rose +0.06 to 13.48.

TLT rose just +0.11% on the day; it was down early, but rallied strongly after the ISM report.  TLT printed a "bullish belt hold" today, which suggests higher prices for bonds going forward.

JNK rose +0.24%, bouncing back above its 9 EMA.  Junk bonds have more teflon than SPX.  I'm pretty sure SPX won't correct until we see junk debt start to weaken.

CRB fell again today, dropping -1.11%, ending the day just above its 200 MA.  Today's move was almost all about falling oil prices.  A drop below the 200 would put commodities back into a longer term downtrend.

As I said yesterday, PM and especially the miners had moved into oversold territory, and the bounce we saw today was an example of a small catalyst causing a strong reaction in an oversold market.  The real moment of truth will come tomorrow at 08:30 Eastern when the Nonfarm Payrolls report is released.  It will probably move the buck, and the buck will move gold.  Which direction?  I have no idea.  I'm betting that payrolls won't be good enough to guarantee a rate rise (i.e. I bought some miners with that outcome in mind), and I'm hoping this will be a "sell the news" event, but its a dice roll.

Miners are trading at a 20% discount to where they were four weeks ago.  Is that good enough?  I hope so.

From the year-long viewpoint this is probably a tempest in a teapot, since in the long term, rates will not go up for much longer.  But - since this is a daily commentary, my focus is often on the tactical rather than the longer term strategic picture.

Nonfarm Payrolls tomorrow!

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7 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
Nonfarm Payrolls: +151k headline, +175k expected

Initial reaction: buck off -0.50, gold up +15, silver up +0.40, crude up +0.50.

I don't think there is any way this can be spun as a great number.  Its not horrible, but it probably trims the chance of a rate rise.

Yay!!!  :)

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
It's a Silver Melt-up Friday...

Always nice to see   : )

 

http://investmentresearchdynamics.com/why-do-central-banks-need-to-exist/

....Almost every year the precious metals sector experiences a price correction late in the summer.   And almost every year the anti-gold propaganda floods the internet and media. This year is no exception.  But the current pullback in the sector has about run its course.   This was a healthy pullback after the huge run up in the sector.   The next leg higher should be even more exciting....

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
the tell

Silver has been outperforming gold now for the past week.  It broke above the 9 yesterday, and now it's leading again.  That's a bullish sign for sure.

I can't speak to what will happen next with the same authority as a goldbug writer, but I think it looks positive. :)

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 573
Art Berman interview

Erik Townsend welcomes Art Berman to MacroVoices. Erik and Art discuss:

  • Looking beyond absolute inventory numbers and gleaning insights from comparative inventories
  • Recent anomalous comparative builds relative to historic trends
  • Continued time-spread compression reflecting producer hedging or lack of concern for a storage crisis
  • The selective capital raising environment for producers
  • Oil market balance and Saudi Arabia’s fundamentally ineffectual ‘production freeze’
  • Stabilizing US production and evaporation of upside price catalysts
  • Feedback loop of insanity in inventory builds and production
  • Claims of sub-$40 producers in the Permian basin
  • Concerns over consumption growth not aligning with change in prices
  • Timing for a moonshot in oil prices following a period of supply destruction and investment deficits

http://www.artberman.com/blog/

 

newsbuoy's picture
newsbuoy
Status: Silver Member (Offline)
Joined: Dec 10 2013
Posts: 228
Logical reasoning for illogical FED policy?

BE VERY CAREFUL with this sort of reasoning. It is not a mechanism. We have been very carefully trained.

After 8 years, do we really think that the FED is going just let the Insurance companies and pension funds start failing?

One can keep a beach ball under water for only so long. Can they let it come closer to the surface without it slipping out of their control?

Beware the ides of December! [apologies to Willie the Shake...]

Tax brakes for corporations, clemency for the poor and all the hope you can believe in.

Who moved my tambourine!

 

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2768
FED Policy Summary

In two words: ALL MINE

Predictable primate response:

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Monday

I'm looking for Japan's Abe to jaw bone more possible money printing Monday.  It should be a nice time to smash the PM's via boosting the USD/JPY while the U.S. markets are closed for the holiday.  I've seen this movie before.

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