PM Daily Market Commentary - 10/5/2016

davefairtex
By davefairtex on Thu, Oct 6, 2016 - 2:36am

Gold fell -1.50 to 1269.00 on moderately heavy volume, while silver fell -0.05 to 17.78 on moderately heavy volume also.   Both gold and silver continued lower after yesterday's big moves down, but some buyers did show up, keeping the losses today to a minimum.  The dollar cooperated by closing the day virtually unchanged.

Gold traded in a range today - attempting to rally, failing, then dropping to a new low, and afterwards rebounding to close the day virtually flat.  The candle print today was a "high wave", which is a low-probability reversal bar; about a 10% chance of marking the low.  Certainly some buyers did show up today - although they could just as well have been shorts looking to ring the cash register after the big drop yesterday, its really hard to know.   There is a reasonable support zone around the 200 MA, just above the 1250 price level.  After yesterday's big drop, I'd like to see an actual higher percentage reversal before jumping in there.

December rate-rise projection is at 52%, down 3% from yesterday.

Gold open interest at COMEX fell by -11,469 contracts.

Silver's intraday pattern was much like gold's, making a new low but then closing the day largely unchanged.  Silver's candle print was variously a doji star, a long legged doji, a southern doji - all more or less amounting to a 25% chance of marking the low.  It sure beats yesterday's nasty big red candle, but it really does need confirmation.  Odds are fairly high that we will see lower prices tomorrow.  Today could just be a day of rest leading to more selling tomorrow - or it could be "the low."

Both miner ETFs made new lows and then rebounded; GDX rose +0.77% on moderately heavy volume, while GDXJ climbed +0.88% on heavy volume.   GDX found support at its 200 MA, bouncing off the 200 and printing a hammer candle on the day.  Code says that's about a 26% chance of marking a low.  Much like silver's doji, it really needs confirmation tomorrow in order to be a real reversal bar.  Still, a low-grade hammer sure looks more positive than the big red candle from yesterday.

Platinum fell -0.83%, palladium dropped -3.42%, and copper moved down just -0.05%. 

The buck tried rallying today and failed, closing down -0.01 to 96.09.  If the buck tops out here, it might just encourage gold to mark a low.  The buck printed a doji candle, which is a sub-20% chance of forming a reversal bar here.  Odds are the buck continues moving higher in the near term.

Crude rallied for the sixth straight day, moving up +0.51 to 49.70.  Oil rallied going into the petroleum status report, which showed a bullish inventory draw which kept prices moving higher.  Round number 50 is not far away.  At some point buyers will run out of enthusiasm, but so far every bit of news has been oil positive.

SPX rallied +9.24 to 2159.73, recovering most of yesterday's drop.  Financials (XLF:+1.61%) led, with utilities (XLU:-0.16%) bringing up the rear.  In spite of today's rally, SPX still looks weak; unable to move above its 50 MA.  VIX fell -0.64 to 12.99.

TLT continued falling today, down -0.47%.  This is the 4th straight down day for bonds.

JNK rallied +0.27%, making a new all time high.  JNK remains strong.

CRB jumped +0.79%, making a new high for this cycle.  CRB continues to improve.

Making a low is sometimes a process.  First, the downside velocity has to slow...then stop.  Then finally reverse.  Today the move lower stopped, at least for a day.  Will this draw enough buyers out of hiding?  Perhaps the commercials will ring the cash register even more enthusiastically tomorrow, causing a rebound.  More likely, we'll make a new low tomorrow, at least that's what the candle code suggests.  The miners looked more positive than gold or silver.  Is that a tell?  It could be.  But we could just as easily see a continued sell-off there too after a head-fake higher.

Its still a time to be careful.  If we see a dollar rally, we could easily get new lows for PM.

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9 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 378
Clobbered

Set up for another shellacking today.  Gold down almost a percent at -$10, and silver down over 1.5% and dropping rapidly.  Miners going to take a beating also.  Dollar looks to go to the moon.  Why not.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
the trend, retail hour

The trend tends to remain in place until something happens to cause it to switch direction.  Yesterday we had a bunch of doji candles which now appear to have just been a pause.  Candle code told us it was a relatively low-probability reversal, and that's proving to be correct.   (The candle code is smarter than you or me because it has looked at 20,000 different contexts to come up with its assessment of where things go next).

I disagree with your assessment of the miners.  They are only down a few percentage points, and they are definitely seeing buyers  - they gapped down at the open because of gold, but they've rallied steadily off the lows.  GDX made its low in the first minute @ 22.73, and now its up 40 cents from that low point to 23.10.  This feels like retail "buying the dip."

But the effects of the retail hour are ephemeral.  For us to get a true picture of where we're going next, we need to wait for the first 60-90 minutes to pass.  If the buying continues, that's good news.  If not, big money isn't on board and we probably continue moving lower.

The 0.37 point dollar rally is not great news for sure.  Its a new high dating back to August, and if it continues PM probably continues moving lower.  TLT is getting hit too.  It feels like rate-increase blues, and the chances did pop up 4% today.

Armstrong has a "weekly bearish" for gold at 1275.  If we close below 1275 at end of week, that signals a further decline to come - according to him.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
fun article from KWN

Andrew Maguire over at KWN had a rant about the recent gold sell-off.  Summarizing the section I found most interesting:

  • China is on holiday all week long: the SGE is closed.  Its a sort of "cat's away, mice will play" theorem.
  • He projects the Nonfarm Payrolls (coming on Friday) as being bearish.  "Smash gold now while you can."
  • Sees 1250 as the "final bottom" [Note: we did get a nice bounce off 1252...we'll see if it holds]

I really enjoy it when people get specific.  Andrew Maguire is willing to go on the record, and if it works out the way he says, I'm going to listen more closely to him in the future.

http://kingworldnews.com/andrew-maguire-a-staggering-1000-tonnes-of-paper-gold-rinsed-out-of-the-market-today/

Western officials purposely waited for the Chinese to be on holiday before they began to smash the gold and silver prices.  But China will be back buying on Sunday night and they will surely capitalize on this discount.  However, even though the Chinese are on holiday, the Peoples Bank of China (PBOC) is not, and they are actively buying gold into this dip.

Officials and insiders already have the Non-Farm Payrolls data, and looking at the veracity of the paper gold selling, this suggests Non-Farm Payrolls will be a miss.  This is a massive overshoot taking place to the downside in the gold market, with hot (small speculator long) money now rinsed.  Wait until you see the COT report this week, Eric, it will actually capture the COT short covering and will reveal many of the small specs have been flushed.

Now, with the bit firmly between their (the small speculators’) teeth, we could expect a test of the key Fibonacci .618 level at $1,267.20, as the hot money capitulates.  Worst case, I see $1,250 as a final bottom, where I will be a massive buyer...

Jim H's picture
Jim H
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Joined: Jun 8 2009
Posts: 2391
Oh, and in the category of physical demand.. there is this..

http://www.silverdoctors.com/silver/silver-news/silver-demand-roars-back...

lack of physical supply will one day be the final signal that the reset is about to happen. 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 378
Armstrong

Is he still thinking slingshot move with gold?  Where we go down to $1100 or $1050 or whatever and then pop much higher?

Anyway, another bad day for the sector.  Your candle code is the bomb!  Gold looks to have held $1250 for now with a near double-test.  Going to take a lot of work to close above $1275 tomorrow.  It's only about $20 bucks, but that seems like a long, long way, given recent action.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
GBP flash crash in Asia

The GBP had a flash crash about 2 hours ago - dropping 6% in a one minute period.  Not sure what that was about, but its a sign of the times.  Stuff just isn't working all that well.

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2884
Re: Flash crash
davefairtex wrote:

The GBP had a flash crash about 2 hours ago - dropping 6% in a one minute period.  Not sure what that was about, but its a sign of the times.  Stuff just isn't working well anymore.

Probably just Chris's flight landing.

Time2help's picture
Time2help
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reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 279
china
Cold Rain wrote:

Is he still thinking slingshot move with gold?  Where we go down to $1100 or $1050 or whatever and then pop much higher?

Anyway, another bad day for the sector.  Your candle code is the bomb!  Gold looks to have held $1250 for now with a near double-test.  Going to take a lot of work to close above $1275 tomorrow.  It's only about $20 bucks, but that seems like a long, long way, given recent action.

the date for dumping $billions in gold contracts in such a short span was chosen deliberately - chinese national holiday oct 1-7, so not many buyers around to soak up the "gold" being sold, even if it was fake paper gold.

i expect starting monday, gold will be more resilient to any down-drafts.

 

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