PM Daily Market Commentary - 9/8/2016

davefairtex
By davefairtex on Fri, Sep 9, 2016 - 5:05am

Gold fell -7.40 to 1338.30 on moderately light volume, while  to 1345.70 on light volume, and silver dropped -0.18 to 19.62 on moderately light volume also.  Gold and silver started falling after 08:30 Eastern; it wasn't a huge sell-off, but it didn't stop until the afternoon.

The timing of the drop in gold today suggested that the selling came primarily from Europe; the ECB was widely expected to "do something" - either formally extend the QE period, broaden the categories of things that they would buy such as equities, and even possibly talk about actual helicopter money.  When Draghi indicated in his press conference that there was no specific plan - or even discussion - for any of that, gold more or less sold off, and didn't really recover.

On the chart the retracement is starting to get a bit more serious - gold printed a relatively mild two-candle swing high (19-31%), and closed just below its 50 MA.  Volume on the move lower continues to be light, but no dip-buyers have shown up yet.

Rate-rise concerns have edged higher but are still low: 18% for the September 21st meeting.

Gold open interest at COMEX rose by +8,254 contracts.

Silver dropped more than gold did again today, but the charts look similar; silver also closed below its 50 MA, and silver would have printed a swing high except that the two top candles have the exact same price, and the rule for swing high is that the top candle must be the highest one, so silver escaped by a penny.  Volume remains light.  Silver is getting some help from copper, which is now moving sideways - which is a vast improvement on what it was doing previously.

Miners didn't particularly like what the ECB had to say either, with GDX off -2.17% on moderately heavy volume, while GDXJ lost -1.89% on moderately heavy volume also.  The move pulled the junior miners back below their 50 MA.  Both miner ETFs closed relatively near to the lows of the day.  While dip-buying appeared yesterday in the miners, it was much less evident today.  That's a more bearish sign.

Platinum dropped -0.74%, palladium fell -0.07%, and copper rose +0.12%.  Copper has managed to crawl back about 2 cents off its lows.  Let's hope it can continue.

USD sold off fairly hard going into the ECB meeting and for a time thereafter due to a strong Euro rally, but the Euro rally soon faded, and the buck came back, closing up +0.09 to 94.97.  This was a surprising outcome for me - I expected if the ECB did nothing, it would be Euro-positive.  It was, but only very mildly so. The buck ended up printing a "high wave" candle which looked relatively bullish: 22-44% chance of being a low.  A dollar rally would probably be bad news for gold.

Crude staged another big rally, up +1.18 [+2.56%] to 47.32, shooting up after the petroleum status report showed a shockingly large draw of -14.5 million barrels; the second largest in history.  How much was due to the hurricane, which temporarily shut-in production?  Its hard to say - probably most of it, but perhaps not all of it.  Oil equities broke to new highs, with XLE up +1.87%.

In spite of oil's big move, SPX fell -4.86 to 2181.30, dragged down by cyclicals (XLY:-0.86%) and tech (XLK:-0.82%).  SPX printed another spinning top, providing us with no directional information; SPX remains above its 9 EMA.  VIX rose +0.57 to 12.51.

TLT sold off hard, dropping -1.25% and dropping beneath its recent narrow trading range as well as its 50 MA.  It pretty  much just sold off all day long.  The timing of the sell-off matches up with the ECB announcement, although it was a steady waterfall down rather than one dramatic spike.

JNK also dropped, losing -0.22% and coming to rest just above its 9 EMA.  JNK remains in its steady uptrend.

CRB rallied +1.73%, with 3 of 5 commodity groups rallying - led by energy.  CRB has moved back above its 50 MA, which is a positive sign.  It remains in a medium term downtrend, but a few more days like this and it will break out.

Gold & the miners didn't much like the outcome of the ECB meeting.  No new money printing led to a mild sell-off in the PM sector.  It is starting to look like the absence of a negative catalyst for gold (i.e. no Fed rate rise) may not be enough to shove gold to new highs after all.  With no near-term prospect of an increase in negative rates from the ECB, gold is coming under some selling pressure.

On the charts gold is in a bit of a no-mans land; it has dropped back below the 50 (at least on my charts), and those pesky commercials will start to have things more their own way if the buyers start to fade.  While the swing high wasn't a strong one, how gold finishes the week will be an indicator of current market sentiment: do traders want to take gold home over the weekend?

Longer term, Armstrong suggests that if the market can't close above 1358, it implies a re-test of the low at 1305 - although the timeframe he is talking about isn't necessarily this week.

Gold in Euros looks more bearish than gold in USD.

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1 Comment

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
sell everything!

A minor sell-everything mood this morning - courtesy of yet another Fed official.

"We're going to raise rates...well, just because."

Is it the real deal?  Bonds are off big, so are utilities (sold!), SPX has broken through its 50 MA, and banks are rallying (cover short!).  This all signals rate rise - and checking in with Fedwatch, we see the chance has risen to 30%, up from 18% just last night.

Based on the market's reaction, its probably the real deal.  Gold is doing relatively well, but I don't predict good things for either stocks or bonds, based on today's price action.

I suspect somebody knew yesterday.  That's why the buck rallied and bonds fell yesterday - two things that didn't line up with the ECB doing nothing.  The ECB doing nothing should have been Euro-positive, but it wasn't.  I saw both things, but didn't put it all together.

http://www.bloomberg.com/news/articles/2016-09-08/japan-index-futures-signal-bounce-as-ecb-outlook-weighs-on-bonds

“Dovish Fed members getting called up to bat for a hike is putting people on edge,” Yousef Abbasi, a global market strategist at JonesTrading Institutional Services LLC, said by phone. “The more hawkish-leaning investors are grabbing onto that and it’s certainly one of those days where people are positioning for that September hike being back on the table.”

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