PM Daily Market Commentary - 9/14/2016

By davefairtex on Thu, Sep 15, 2016 - 3:13am

Gold rose +4.20 to 13.22.40 on light volume, and silver rose +0.09 to 18.99 on very light volume.  Gold and silver moved slowly higher for most of the day; a falling dollar did not seem to affect prices one way or another.

Today we see gold made a new low but rebounded, printing a "bullish harami" candle pattern [fun fact: "harami" means pregnant - today's small white candle body is entirely engulfed by yesterday's larger red one] but the rating is below average: 19-28% of marking the low.  Volume was lower than average, and it traded in a relatively narrow range.  While it was a relatively uneventful day, I didn't particularly like the weak move in gold given the magnitude of the drop in the buck.  It felt to me like gold should have been more enthusiastic.

Rate-rise assessment for September remains at 15%.

Gold open interest at COMEX fell by -1,047 contracts.

Silver performed a bit better than gold today, but on the chart things look relatively similar.  Volume for silver today was quite light, and the spinning top candle print isn't particularly exciting.  The gold/silver ratio did fall, which is helpful, but I expected a bit more out of silver today because of the drop in the buck and a very strong rally in copper, which broke sharply above a 3-week consolidation and printed a fairly dramatic swing low.

Miners didn't look so healthy today, with GDX off -0.19% on moderately light volume, while GDXJ rose +0.36% on moderately light volume also.  That wasn't a very large move, but for the miners to drop on a day when both gold and silver rose didn't seem ideal.  The shares actually opened fairly strongly, but sold off for the first half of the day, moving sideways into the close.  Candle print was a "spinning top", which to my eye appears to be just a continuation of the downtrend.

Miners just feel weak right now.  Perhaps it was the selling at the start of the day that made me feel like this.  Even after the dollar started to sell off, it appeared that the buyers just weren't there.  I think the next step is a retest of the recent lows at around GDX 25, which is not very far away.

Platinum rose +0.22%, palladium was up +0.06%, and copper staged a strong rally, rising +2.38% and breaking dramatically above its 3-week consolidation.  Copper also printed a swing low.  I had hoped that the expected copper rally would have encouraged silver, but that didn't happen.  Copper's rally stopped right at the 50 MA.  Why did I expect copper to move higher?  The COT report shows managed money heavily short, and if its one thing those commercials love to do, and that is causing managed money shorts to cover.  This may go on for a while, I think.  Maybe I should trade copper, it seems more predictable.

The buck fell today, losing -0.30 to 95.25 and dropping just below its 9 EMA.   The buck printed a low-rated "bearish harami", which only has a 15-21% chance of marking a top.  Selling in the buck started a bit after 10:00 Eastern; there weren't any major economic reports today, so I'm not sure what caused the move, but the fall in the dollar didn't seem to help PM or crude at all.

Crude fell hard today, dropping -1.30 to 43.72.  Crude sold off going into the petroleum status report, rallied briefly after the report showed a surprise (bullish) inventory draw of -0.6 million barrels, but then tipped over and continued to sink once again, closing almost at the lows for the day.  Candle print - opening black marubozu; those are always bad news.   Crude should have some support around 43, and then a bit more at the 41 level, but as of right now, buyers are staying away from oil.  What do you do when price fails to rally on good news?  You sell.  Maybe a target price might be 41?  It isn't even oversold yet.  We might even go lower than that.  There will probably be a few days of follow-through after the bearish reaction to today's status report.

SPX tried to rally today and failed, dropping -1.25 to 2125.77, printing a "high wave" candle - in this circumstance, it is not a reversal bar.  Energy was the worst performer (XLE:-1.18%) while tech actually rose (XLK:+0.47%).  The most positive thing I can say is that SPX did manage to find support at the 2120 low, but the chart doesn't look great; in the last four days, each day's high is lower than the previous day's high.  Based on this progressive drop in enthusiasm, I believe the odds are good we make new lows in the very near future.  I do not think 2120 will hold.  VIX rose +0.29 to 18.14.

TLT tried to rally today but failed, rising just +0.15%.  It too looks weak.  It appears that traders are swapping their 20 year bonds for shorter duration instruments.

JNK fell just -0.08%, dropping further below its 50 MA.  Its a small enough move considering the drop in energy prices; JNK is actually holding up relatively well.

CRB fell -0.59%, with energy falling but industrial metals rising.  CRB continues to move down towards its 200 MA.

Today felt a little bit like "dead cat bounce" day - well except for oil of course, which more or less cratered on good news.  Always a bad sign, that "selling off on good news."  Its only a guess, but I think we have lower oil and equity prices ahead, and PM isn't looking all that strong either.  The only bright spot is copper, and that just seems to be about hosing managed money - the favorite pastime of the commercials, when they can actually make it happen.

We have two big reports tomorrow: there is Retail sales at 08:30, and Industrial Production at 09:15.  Consensus suggests a weak production report, and a weak retail sales report also.  If they surprise to the upside, it would probably spell near-term disaster for PM; the ground would probably open up and swallow gold whole as expectations for a rate increase jump higher.  This translates to a re-test of the 1300 support level, which given today's climate, I'm not sure would hold.  I'm not saying this will happen, its just a risk.  In the other direction, the current rate rise odds stand at 15%, so I'm not sure there is too much upside left to squeeze out of a surprisingly bearish report.

PM is in a downtrend, as are the miners, and crude, and SPX, and bonds.  Even JNK is looking a bit unhealthy right now.  Cash is a good place to be at the moment.  Ah, cash.  What's not to like about cash?  "Delicate fivers stuffed into bulging wallets..."

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