PM Daily Market Commentary - 9/15/2016

davefairtex
By davefairtex on Fri, Sep 16, 2016 - 4:09am

Gold fell -6.30 to 1316.10 on moderate volume, and silver rose +0.04 to 19.02 on light volume.

The weaker-than-expected retail sales report caused gold to first spike higher, but then it reversed, making a new low at 1310.40.  This lined up with the action in the buck, which made a low off the retail sales report but then reversed higher again.  Industrial production also dropped, but the markets pretty much ignored that from what I could tell.

On the chart we see the new low, and a long black candle which is not any sort of reversal bar.  Gold is moving steadily lower, apparently heading for a re-test of the previous low at 1302.  Volume is slowly rising as price falls, which is a bearish sign.  I've noticed that gold sometimes likes to sell off ahead of FOMC meetings; we have one next week.  Perhaps that's a contributing factor to gold's weakness.  I'm sure the commercials are pushing price down every chance they get - but if there were a lot of buyers out there, that wouldn't matter.  Perhaps buyers are waiting for the day before FOMC to make their appearance.

Gold in Euros is right at support right now.  If gold falls through support in Europe, we could see a fair amount of selling over there - which of course would translate into selling in the US too.

Rate-rise assessment for September fell to 12%.

Gold open interest at COMEX fell by -1,385 contracts.

Silver outperformed gold again - it rose slightly on a day where gold fell.  The candle print, a long legged doji, gives us no real clue where things go next.  Silver remains below its 9 EMA; the dragonfly doji reversal bar from four days ago remains in play, but silver has been unable to print a swing low so far.

Senior miners made a new low, but managed to rally back; GDX closed up +0.65% on moderate volume, while GDXJ rose +0.25% on moderate volume also.  Today's candle print was a "spinning top" - this particular one looks somewhat bullish: a 26-36% chance of marking a low.  Most spinning tops are useless, but this one today is an exception.

We really need a close back above the 9 EMA to mark a reversal; in the other direction, a break below the previous low at around 24.50 would probably lead to a lot more selling.  The fact the miners managed to stay green on a day when gold fell is a mildly positive sign.  Perhaps the selling in the miners is starting to abate.

Platinum fell -0.52%, palladium was up +0.02%, and copper was flat; copper has run into resistance at its 50 MA.

The buck had a moderate-sized trading range today but ended the day down just a bit, losing -0.04 to 95.21.  The buck is below all 3 moving averages; it looks as though it may be about to turn down.  The buck was relatively resilient today in the face of the weak Retail Sales report, but the fading odds of a rate raise seem to be taking their toll.  We have a BOJ policy announcement early next Wednesday morning (the "wee hours!" - 02:30) followed by a Fed announcement at 14:00, and a press conference at 14:30.  That's a busy Wednesday.

Crude was mostly flat, rising +0.10 [+0.23%] to 43.82.  Candle print today was a doji, but it was not a reversal bar according to the candle code.  Still, its nice to see that oil isn't moving in some straight line down - perhaps today was just a day of rest.  Crude did make a new low, so tomorrow could yield a reversal if we can get a close back above 44.46.

SPX staged a reasonably strong rally today, rising +21.49 [+1.01%] to 2147.26.  Falling retail sales?  No problem!  Tech (XLK:+1.64%) and energy (XLE:+1.24%) led, with financials (XLF:+0.59%) bringing up the rear.  The rally was stopped by the falling 9 EMA line - SPX needs a close back above that 9 EMA before I would start to think about a reversal here.  VIX fell -1.84 to 16.30.

TLT fell today, dropping -0.43%, making a new low.  Bonds look ill.  The 20 year treasury yield is back up to 2.13% - up 43 basis points since the low of 1.69% back in early July.  That's around an 7% loss to anyone who bought the top - 4 years of interest payments.  Ouch.

JNK rallied +0.43%, finding support on its 50 MA.  It remains in a downtrend, but it did print a two-candle swing low today (38-47% chance of the low).  Traders still seem to love their junk.  So to speak.

CRB rose +0.66%, led higher by energy.  CRB remains in a downtrend.

The SPX rally was a bit of a surprise; some amount of that was about AAPL (which is on a bit of a tear right now - I guess its good news about the Iphone...are we up to Iphone 50 by now?) and some about energy equities which appear relieved that oil didn't crater again today.  Dip-buyers like oil equities as much as they liked miners over the past 8 months.

Gold may have another couple of days of selling before FOMC announces on Wednesday.   Let's hope 1302 support holds until then.  BOJ could also say something exciting too; maybe a deeper drop into negative rates will finally spur those pesky Japanese savers to spend more.  That, or they'll buy more home safes and withdraw even more cash.  That stimulates both the printing industry and the home safe industry at the same time.  I'm not sure which "arrow" that represents - perhaps the Arrow of Unintended Consequences.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

16 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5059
bad CPI report

A CPI report that showed some inflation (core: 3.6% annualized) caused a big move higher in the buck - and of course that means selling in gold and silver, and oil, and SPX.

Oil made a new low, so did silver, so did gold.

Rate rise percent remains at 12%.

http://www.econoday.com/economic-calendar.aspx

The 0.3 percent increase in the core index was the largest rise since February 2016. Along with shelter and medical care, motor vehicle insurance, apparel, communication, and tobacco all increased. The medical prices index showed a substantial increase, driven by higher hospital services costs and prescription prices. In contrast, used cars & trucks, household furnishings & operations, recreation, and airline fares all declined in August.

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1216
Reports

When was the last time there was a good report in anything? Seems like an endless litany of 'misses' but it is not apparent how any of it really factors in to expectations of the Fed or markets for more than a few hours.

Inflation is up so the dollar gets stronger? Is that saying FX thinks the rate rise is more likely even though the markets expectations is at 12% for such an outcome?

This is all becoming reminiscent of the philosophical debates about how many angels could dance on the head of a pin...

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Inflation -- Gold -- Dollar

So, we get an uptick in inflation and PMs drop, the dollar makes a huge move higher, stocks are lower, and miners continue to get creamed.  I thought inflation was good for PMs and bad for the dollar.  Is this all about fears of a tightening cycle?  Hard to make a lot of sense out of it.  Seems like there are so many bullish analysts in the Alt Media space for PMs, so much bad economic data coming out (bullish for PMs), and more than a couple big investment icons touting PMs, yet PMs drop daily now and the miners appear to be going much, much lower.  Hopefully, the PM space doesn't relinquish all of its gains for the year.  But nothing seems to make much sense, so I guess that's a strong possibility.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5568
Inflation, gold, dollar
Cold Rain wrote:

So, we get an uptick in inflation and PMs drop, the dollar makes a huge move higher, stocks are lower, and miners continue to get creamed.  I thought inflation was good for PMs and bad for the dollar.  Is this all about fears of a tightening cycle?  Hard to make a lot of sense out of it.  Seems like there are so many bullish analysts in the Alt Media space for PMs, so much bad economic data coming out (bullish for PMs), and more than a couple big investment icons touting PMs, yet PMs drop daily now and the miners appear to be going much, much lower.  Hopefully, the PM space doesn't relinquish all of its gains for the year.  But nothing seems to make much sense, so I guess that's a strong possibility.

Right now everything is trading at the hands of the big money flows.  If the dollar ticks up, gold will tick down, as will oil.  Dollar-euro-yen crosses are either driving or driven by equity and bond movements.

Everybody is trading as if this all made sense.

And it does, until it won't.

At some point the music stops, people realize how few chairs there are, and the scramble to find a seat begins.  There will be pushing and shoving.

I don't hold gold because it's a useful inflation hedge.  It's not.

I hold it as a hedge against the systemic fragility and institutional insolvencies that will be revealed once the pushing and shoving starts.

In these late-stage bubble dynamics nothing makes sense, reports don't matter, p/e ratios don't matter - nothing matters.  Until it does.  And then it will matter a lot.

Again.

Wash, rinse, repeat.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5568
Fancy bubble talk

Following my above post, in a bubble things just go up in price and it doesn’t make sense anymore.

But people have to try and make sense anyway, and so they form words into sentences that seem to do just that.

Here’s an odd bit of news that is easily explained by saying the word “bubble” but every other possible reason is explored, no matter how contrived:

New Kind of Correlation Spotted in Factors Obsessing Wall Street

Sept 9, 2016

One selling point of a newfangled investment strategy that has swept Wall Street is diversification through factors: buy stocks with high dividends, and your results will vary from those chosen for price momentum. But what if that benefit broke down?

[Translation: everything is going up in price]

Something like that is happening in the stock market right now, according to researchers at Sanford C. Bernstein & Co., who found that correlations among investment factors have shot to all-time highs. Swings in groups of stocks sorted by traits such as valuation or momentum are mimicking each other in size, the New York-based investment firm found.

“Investors should view this as telling them that the market is in fact heavily influenced by macro variables at present, but that common macro driver is being felt by a high degree of co-movement between the groups of stocks that make up factors rather than all stocks happening to move together,” wrote Inigo Fraser-Jenkins, head of quantitative and European equity strategy, in a note to clients.

 

Wow.  that last sentence in bold is a real doozy.  It can be reduced to a single, much simpler word; bubble.

But you don't make your salary at a fancy investment research house by saying bubble.  You need fancy bubble talk.  

And so you say "the market is in fact heavily influenced by macro variables at present, but that common macro driver is being felt by a high degree of co-movement between the groups of stocks that make up factors rather than all stocks happening to move together."

I say bubble.

 

 

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1216
Another term...

"the market is in fact heavily influenced by macro variables at present, but that common macro driver is being felt by a high degree of co-movement between the groups of stocks that make up factors rather than all stocks happening to move together."

The technical term I know for statements like this is "baffle them with bullshit". They don't understand the 'bubble' dynamics better than anyone else but they certainly can't admit that they don't understand, so they make sure that you don't understand what they just babbled in the hopes that you will think they are just way smarter than you. Correlation is not causation but bubbles are causation and they correlate with all we are seeing. Hmm.

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
CPI, Healthcare Costs, & the USD

CPI is mainly up because of higher healthcare & health insurance price increases.  This reflects anything but a strong economy & rising wages.  The price increases come directly from the government's own (misguided) mandated healthcare polices.  This rise in CPI has absolutely nothing to do with true growth or anything remotely close to it.  Only the MSM spin machines can argue the Fed's low interest rates are somehow responsible for this higher CPI number & that this somehow supports higher rate expectations & a bid for the USD.

Smoke, mirrors, & misdirection.  At least it makes for some good feeding for the sheeple.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Thank You

Thanks, Chris.  Much appreciate the perspective.  It's funny how your comments make sense of a bunch of dynamics that make no sense!  Anyway, I believe that analysis is spot on.  And I agree about gold.  I have some physical gold and silver and hold that as a hedge against the system, and only for that purpose.  I was just wondering if I was missing something in terms of the relational dynamics of PM to inflation, currency movements, economic conditions, etc.  Because to me, no explanation, outside of the fact that we're living in a bizarro world, makes much sense today.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5059
gold in 2016

Gold in Euros has been in a much more noticeable downtrend than gold in dollars, since a few weeks after BRExit.  Perhaps...that's where the real problem lies.  And when I say problem, its really just a problem for this particular phase of the new gold advance.

My guess: negative rates in the EU got a bunch of people to jump into gold - as an escape from the negative Euro bond rates.  Then BRExit punched gold another $100 higher.  We haven't had anything truly major since then, and once the world failed to end following BRExit, gold has been in a slow but steady retreat.  US rate issues have moved price back and forth, but within the confines of an overall down-trending channel.

I think gold will probably continue to retreat until we have some new event that our friendly central planners have to respond to.

Here's my suggestion: don't pay attention to "what gold should do."  That way lies trading-disaster - you'll find yourself blaming price moves on manipulation and moon-phases and using all sorts of rather lame excuses as to why gold isn't behaving the way you feel it should be.

Pay attention to what gold is actually doing, and try to link that with other stuff happening around the world.  Then you'll have a chance to - perhaps - get a clue as to what might be going on.

Gold often moves in sympathy with other commodities.  Sometimes it doesn't.   Often it moves counter to the buck - but sometimes it doesn't.  Right now it seems weak.  Short term, that may be about the Fed meeting next week.  Often I've seen it sell off the week before a Fed announcement, and bottom out the day before.  (I should do a study on that one; that's just my sense).

Longer term, our central planners don't have any conventional ammo left.  I'm guessing there's a downturn coming.  If they do nothing in response, markets will figure out quickly they're powerless, and equities will (probably) crater in response.  So they'll have to do something.  And that probably kicks off our next leg up.

If we don't have a massive equity-market sell-off (and it is looking as though the recent drop isn't going to lead to one), then gold probably also won't crater either.

My guess, of course.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5059
CPI move

dryam-

I agree 100%.  CPI move today has nothing to do with monetary inflation, which is what they should be focusing on with their monetary policy.  Its just costs going up because of the cartels and their absurd pricing strategies.

Raising rates to fight healthcare cost increases ... probably not the ideal tool to use on the problem.

But market looks at the headline number and assumes the Fed might trigger off it, and so the buck screams higher...

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Where gold is going.....

Anyone (other than the CB's & the large banks) who thinks they know what is driving daily, weekly, or even monthly price changes in gold doesn't know what he/she is talking about.  There are so many balls being juggled in the air in regards to the worldwide financial mess right now.  No one could possibly have a clue to knowing where prices will go for anything.  Trading the PM's should be left the very, very few who have some sort of truly special knowledge  That would probably exclude 100% of people on this site.  Buy low, & hold (for insurance against currency problems as Chris suggested above).  When prices get whacked buy.

 

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

 

Association does not equal true causation. 

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5059
When prices get whacked buy?

dryam-

Trading the PM's should be left the very, very few who have some sort of truly special knowledge  That would probably exclude 100% of people on this site.  Buy low, & hold (for insurance against currency problems as Chris suggested above).  When prices get whacked buy.

While I don't have any truly special knowledge, I can see that gold is in a downtrend right now.  Should I buy now?   Has price been whacked yet?  It definitely has dropped from $1375 down to about $1310.  Does that constitute enough of a whacking to buy?

Maybe you could let us all know when the price has been whacked.  I think that would be an incredibly useful service if you could provide us all with a reasonable buy point in near-real time.

 

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Buy the dips, not a complicated strategy

Dave,

You seem to consistently have an argumentative tone to your discussions.  

All I was saying was that if people want to own gold, they should buy on the dips.  I'm confident there will be much volatility going forward.

-Cheers

Uncletommy's picture
Uncletommy
Status: Gold Member (Offline)
Joined: May 3 2014
Posts: 473
Let's be clear. . .

IMHO, PM's are a hedge in times of uncertainty. But, to call Gold, Silver, etc. an investment bends the meaning of the word. Time is really the only means we have in affecting a positive outcome in the world around us. Hoarding any commodity to the exclusion of others is about the most base instinct we humans share.  If you are in the "fortune-ate" position to be able to play the markets, then have-at-it. Given the challenges facing our current malaise, investing your time (or money) in your children, neighbors, religious organization, service club, etc., seems to be a less stilted strategy. Something to consider in the Hilary/Donald debate?

Sorry; are my ethics showing?  

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5059
buy the dips

dryam-

All I was saying was that if people want to own gold, they should buy on the dips.  I'm confident there will be much volatility going forward.

Argumentative?  Absolutely not, I agree 100% with you.  Buy the dips, an excellent strategy.  I'm just looking for a little more detail from you, so your advice can be something actionable.

Everyone wants to buy when the price is low.  But sometimes price dips, rallies a bit, and then it dips again, and then after that, it absolutely craters.  2012-2013 was just such a "dip".  It ended with the April 2013 crater move.  And of course not even that was the low.

So once again, I agree 100%.  Buy the dips.

Let's try something a bit more concrete.  Price has definitely dipped from 1375 to 1310.  Is this a dip we should buy?  Or is another dip coming, and we should wait for that one?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments