PM Daily Market Commentary - 9/20/2016

By davefairtex on Wed, Sep 21, 2016 - 5:00am

Gold rose +1.00 to 1314.70 on light volume, and silver rose +0.04 to 19.25 on light volume also.  PM traded mostly sideways with an upward bias today in a very narrow trading range.  A dollar rally was largely ignored by PM.

Today was really quiet - there was no meaningful change in the chart - gold remains below its 9 EMA, and printed a boring spinning top on light volume.

Rate-rise assessment for September (announcement tomorrow) moved up to 15%.  Two foreign banks (Barclays and BNP Paribas) stated that they believe the Fed will raise rates tomorrow.  Never a dull moment.  If it happens, I'd expect prices to move fairly violently, as I don't think the market expects a rate increase.

Gold open interest at COMEX fell by -924 contracts.

After yesterday's brisk rally, silver just inched higher today, printing a spinning top candle.  Silver remains above its 9 EMA, and today's spinning top did not alter silver's newly bullish trajectory.  If silver is the "tell", PM will start to rally relatively soon.  Of course, its really all about FOMC, at least in the near term.

Miners chopped sideways, with GDX down -0.11% on very light volume, and GDJ up +0.11% on light volume.  It was a very quiet day - the miners printed spinning tops too - and there was no change to the miner chart either.  Everything is in a holding pattern for FOMC.

Platinum rose +0.91%, palladium fell -0.40%, and copper rose +0.47% and made a new high to 2.16.

The buck rallied +0.21 to 95.96, recovering most of yesterday's losses and printing a spinning top - but this one looks actually bullish - it was an almost-hammer, with a 23-28% chance of marking a low.  Going into FOMC, the dollar looks relatively strong.

Crude staged a decent rally, up +0.69 to 44.11 after first making a new low to 42.74.  At end of day, the API inventory report showed an unexpectedly large bullish draw of -7.5 million barrels, and this caused a 50 cent rally, but oil's rally off the lows came much earlier - shortly after the US market opened.  Candle print was nothing special, just a long white candle, but my code was surprisingly bullish, at 32-43% chance of marking a low.   It was another almost-hammer, that's probably why.  If the EIA confirms the API report in tomorrow's petroleum status report, we've probably made a low for oil.

SPX was flat, rising just +0.64 to 2139.76.  Most sectors rallied, led by sickcare (XLV:+0.31%) while energy had a surprisingly bad day (XLE:-0.73%) given oil's rally.  No rate-rise clues from the sector map today.  VIX rose +0.39 to 15.92. 

TLT climbed +0.35%, trying and failing to move above its 9 EMA.  Bonds "should" rally if the Fed doesn't raise, but I'm not all that bullish about bonds right now.

JNK fell -0.06% - no real change.  JNK remains below the 9 EMA, but found support on the 50.  JNK still looks to be in a strong uptrend.

CRB staged a nice rally, up +0.73%; all sectors rose today, with agriculture in the lead.  CRB remains in a downtrend, but if oil can manage to recover, CRB would probably resume its uptrend.

Before I finished writing, BOJ met and announced they won't change their deposit rate (-0.10%) or increase bond purchases, but they will target the yield curve instead, and they will increase ETF buying.  They want the yield curve steeper - supposedly this will help the banks.  This means selling long-dated bonds and buying the short-dated bonds, which would cause longer term yields to rise, and short term yields to fall.

The JGB yield curve right now is 3M: -0.36%, 40Y: +0.58%.  Here in the land-o-the-free, we have our 3M: +0.10%, 30Y: +2.43%.  Positive yields, how awesome is that?

BOJ will lose money on every one of those short-term bonds when they mature.  They currently own 1/3 of the JGBs in existence.

FOMC has their own announcement at 14:00, and we get to hear from Chair Yellen at 14:30.

Is it all about the central planners right now?  Yes, pretty much.  If you could hack into the Fed and listen in to the meeting as they sit and wordsmith the announcement, you could make a great deal of money - probably billions.  Just saying.

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Cold Rain's picture
Cold Rain
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Posts: 380

Something seems fishy about today.  Everything is acting like there's just no chance of a rate hike.  I can't imagine the Fed would actually move today, in front of the election, but it seems like the action is too easy today.  It's never this easy....

Jim H's picture
Jim H
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Gold stocks....

BRIZF hitting new 52 week highs... it's game on for Gold in some quarters  : )   

Cold Rain's picture
Cold Rain
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Posts: 380
No Dice

On the rate hike.  Shocker.  But the case for a hike continues to strengthen, of course.  After almost a decade, the case for the second rate hike has *almost* been made.  Awesome.

davefairtex's picture
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FOMC: no change

And that's a big "no change" from our friends at the Fed.

SPX relief rally occuring on schedule.  Swing low today for oil, for GDX, and for gold.

Silver was (quite possibly) the tell.

"But we'll really, really raise next time."

We still have to sit through a press conference at 14:30 where Chair Yellen can still work really hard to walk back what she just ended up not doing, so we're not out of the woods yet.

cmartenson's picture
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Rate Hike - Rut Rho!

Don't look now, but US stawks are busy selling off, have lost all of their post-decision pop, and looking like they headed for red.

But not to worry, Yellen speaks in 2 minutes and certainly she's got both eyes on the market tape and is even now shuffling new 3x5 cards into the deck to reverse whatever needs reversing, with a stable of other Fed officials with diametrically opposed statements at the ready to trot out on a minute-by-minute basis as the market tape dictates.

What an absolute freak show this has all become.

Edit:  the ""market"" has gone nowhere but straight up ever since Yellen began speaking.  Like clockwork.  Saying very soothing things to the buy bots.  As always.  We shall see.  Why anyone continues to believe the Fed has any credibility or authority here is beyond me.

Edit edit:  Yes, an 80 degree stawk ramp to heaven ever since Yellen began her live press conference where she said...nothing at all.  Consider me the suspicious type who wonders what the ""market"" would have done if the data feeds were cut to the NY Feds cubicles in Aurora klnow, the ones co-located near the Comex servers.  Just a coincidence, we all know, but one that has also coincided with the ""markets"" strange ability to substantiate the Fed's words and desires whenever they speak.  

davefairtex's picture
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buying the dip

Congrats to all who "bought the dip" in the mining shares yesterday.  With GDX up +7.02%, you have a very nice one-day gain.  Trade was not risk-free, but boy did it pay off.

While the event itself was news-driven, the setup was also pretty clear - a sell-off leading up to the event, which naturally coils the spring for a rebound off the news itself, assuming its positive.

Not sure what sort of legs this move will have, it will depend on the buck, at least to some degree.  Yellen at her press conf talked about wanting to see (more or less) wage pressures build up before she felt impelled to raise rates.  People are coming back into the workforce and that's keeping wages from rising as they normally might with U3 at 4.9%.

Maybe it means something, maybe it doesn't.

My guess: no rate increase until Dec, which gives us 12 weeks off until the next set of fun & games with the Fed.  And that's what the CME says too: 14% November, 52% December.

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