PM Daily Market Commentary - 9/28/2016

davefairtex
By davefairtex on Thu, Sep 29, 2016 - 4:14am

Gold fell -5.80 to 1324.90 on moderate volume, while silver rose +0.03 to 19.25 on moderate volume also.  There were a lot of moving parts today; 6 Fed governors gave speeches, Janet Yellen testified in front of Congress, and OPEC agreed to cut production, sending oil prices screaming higher.

Gold sold off slowly in Asia and London, finally making a low of 1321.10 around 11:00 right as the dollar peaked.  Once the buck started to retreat, gold managed to rebound slightly, although in truth it did not look particularly enthusiastic today.  Gold printed an "opening black marubozu", which has a sub-20% chance of marking a low; I think the candle code doesn't like it so much when the lower shadow is so small.  (Why do I say "I think" about my own code?  I used machine learning to teach the computer about candles, so I'm not exactly sure what it is doing and why.  I just show it a candle, and a bunch of context, and it tells me what it concludes.  Computer has seen tens of thousands of candles of each type, so its probably a lot smarter than me about this.)

December rate-rise projection is at 48%, up from 44% yesterday.

Gold open interest at COMEX fell by -16,820 contracts.

Silver fell further, and rebounded more enthusiastically, following more or less the same track as gold.  Silver bottomed at 18.97 at around 11:00, but it managed to recover back into the green by end of day.  Silver printed a "spinning top", which the code says is 16-21% chance of a low.  That's just slightly better than gold.  Candle looks like a hammer/takuri line, but code says the trading range is too small to qualify.  Silver remains above its uptrend line, which is a good sign.  Since copper staged a strong rally, that probably helped silver.

Since PM was down at market open, miners sold off, bottoming at roughly the same time gold did at 11:00.  Then the miners rallied strongly, following both silver and oil.  GDX rose +2.40% on moderately heavy volume, while GDXJ climbed +3.24% on heavy volume.  Candle print for GDX was a bullish engulfing, a 42-48% chance of marking the low, which is about average for this pattern.  GDX also moved back above its 9 EMA, and managed to avoid spiking below its uptrend line, both of which are good signs.

Watching the intraday price action, it felt a lot like PM was guiding off oil; silver and mining share prices really took off after the news came out about the OPEC agreement.

Platinum rose +0.26%, palladium rose +1.90%, and copper rallied up a big +1.47%. All I read in the news is about China's massive debt and its impending explosion, but copper is telling us that this is probably not happening today.  (I believe China's debt is a huge issue; but from a timing perspective, copper is telling us that we're not there just yet.)

The buck tried rallying today - perhaps because of the sheer number of Fed governors giving speeches today - but it peaked at around 11:00 and then retreated back to flat, closing up +0.03 to 95.32.  Had the trading range been larger that would have resulted in a shooting star candle print, but instead we get a spinning top, a sub-20% chance of printing a high.  Its not much help in figuring out what comes next.  Still, the buck does not look strong; it remains below all 3 moving averages and it appears to be slowly moving lower

Crude was where the excitement was today, up +2.23 [+4.96%] to 47.16.  Crude rallied into the petroleum status report which showed a bullish inventory draw.  Yet after that positive note, oil actually sank, probably a result of the dollar rally.  When the dollar reversed at 11:00, oil rallied steadily through to the afternoon, and then a little after 2 the news hit the wires that OPEC agreed to cut production.  At that point, oil and oil equities jumped higher; it was one of the best days for oil equities in quite a while.  On the charts, we see that oil has broken its downtrend line, printed a swing low (63-73% chance of the low) on very high volume.

The oil article I included yesterday claimed that OPEC has virtually no spare capacity right now.  I have maintained for a while that the Saudis can simply return to being the swing producer, drop 2 million barrels per day of production, and oil will instantly jump back to $60/bbl.  This is simply a return to the status quo ante 2014 - its not a revolution of any sort.  Bloomberg had this to say - its a perspective to be sure, but I think they entirely ignore the geopolitics: http://www.bloomberg.com/news/articles/2016-09-28/in-u-turn-saudis-pick-cash-over-flirting-with-free-oil-markets

SPX climbed +11.44 [+0.53%] to 2171.37, printing a two-candle swing low which is a 50-66% chance of the low.  Today it was all about energy (XLE:+4.32%), which staged a massive rally, printing a very highly-rated two-candle swing low (76-87% chance of the low) driven higher because of the news of the OPEC supply agreement.  Sickcare (XLV:-0.15%) brought up the rear.  VIX fell -0.71 to 12.39.

TLT fell -0.22%, first making a new high but then sell off following the OPEC announcement.  TLT remains above all 3 moving averages, but it has yet to turn bullish.

JNK shot higher, up +0.66% breaking out to a new all time high.  JNK liked the energy rally.

CRB rose +1.53%, pulled higher by energy and industrial metals.  CRB is working hard to regain its upward momentum.

Judging from the intraday price moves, it seemed to me that both silver and the miners were pulled higher by the OPEC-induced crude oil rally.  Gold lagged, but when silver leads, gold usually eventually follows.  The miners did particularly well.  I'm on the fence right now; miners have printed a clear reversal bar (the bullish engulfing), silver is neutral, while gold is still dropping.  Near term, PM might just depend on what happens with oil, at least for now, as well as the buck.  Medium term, we're still in a PM downtrend, so the tendency is for price to move lower - those downtrend lines have yet to be broken.

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4 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
DB pounded hard: down -8% - bloomberg details

Rats leaving the sinking ship.  This is a bad sign.  I wonder how bloomberg got the "internal bank document."  That's the story I really want to read!

http://www.bloomberg.com/news/articles/2016-09-29/some-deutsche-bank-clients-said-to-reduce-collateral-on-trades

A number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender, a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank.

While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes, some funds that use the bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Millennium Partners, Capula Investment Management and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, said a person familiar with the situation who declined to be identified talking about confidential client matters.



 

Penny551's picture
Penny551
Status: Silver Member (Online)
Joined: Nov 8 2012
Posts: 149
Offshore drillers

Hay Dave,

Thx for the insight on MAs last week.

I believe you track the offshore drillers...I bought a little RIG last week and have been closely watching SDRL.  My conservative side wants to wait for a break above the 50/200MAs, but am tempted to take a stab at it here w/ a tight stop loss, if there's a pullback.  I know this isn't a trading service but curious about your thoughts...hopefully not too far beyond the scope of a PM commentary! :)

Thx!

Steve

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
oil services

Steve-

So the overall group of oil services & drillers has has the crap kicked out of it..and another one of my coding projects has identified a few of them that might be good here.  (Same code identified AAL a few months back, as well as WNR, which apart from today has done relatively well - I especially liked WNR because of all the insider buying).

At this point, its probably best to wait for a retrace back to a moving average as support.  But the things my code liked recently include: Diamond Offshore (DO), Noble (NE),  and Atwood Oceanics (ATW).  It triggered buy signals about a week ago.

RIG didn't drop low enough for my code to pay attention - things have to be really bad before it notices.

Code doesn't pay attention to SDRL because the price is too low.  Turns out things get hard to predict with very low priced stocks.  I don't think I'd touch SDRL right now, its too likely to have to do a capital raise, and at $2.50 AFTER the big rally, the dilution will be disagreeable for the shareholders.

I'm long the three stocks I mentioned.  And a few others - one risky company named Tidewater (TDW) which is trying to renegotiate its debt.  If it does this successfully without undue cost, it should perform quite well.  If it can't...well...I think that means BK.  Which would not please me at all.

Penny551's picture
Penny551
Status: Silver Member (Online)
Joined: Nov 8 2012
Posts: 149
Great info, thx Dave. ATW has

Great info, thx Dave. ATW has also been on my watchlist. 

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