PM Daily Market Commentary - 11/3/2016

By davefairtex on Fri, Nov 4, 2016 - 6:30am

Gold rose +5.80 to 1303.60 on heavy volume, while silver fell -0.13 to 18.36 on heavy volume also.  PM sold off in Asia and London, bottoming out around 07:30 Eastern and then rebounded into the close.  Gold outperformed silver, and the buck fell yet again, although the pace of the dollar decline is slowing.

Gold managed to close above its 50 MA today as well as closing above round number 1300.  Today was another "spinning top" candle, which the candle code says isn't bearish at all.  The resistance zone from 1302-1310 is a fairly strong one; three separate lows above us means plenty of overhead supply, which will cause trouble for a normal rally.  Still - I think this is a Trump-induced rally, which means if DT actually does get elected, gold will (probably) blow through this resistance zone without much trouble, much as happened with BRExit.    We might even see a new high, its hard to say.

The December rate-rise projection rose 5% to 71.5%.  In the recent past, gold would drop when the rate-rise increased, but now, market is largely ignoring this issue.

Gold open interest at COMEX rose by a big 12,445 contracts again today.  This is the second 12k day in a row.

On the chart we see that silver ran into trouble at the 50 MA, sold off, and then found support on the 9 EMA and bounced back - although it did not perform as strongly as gold.  Candle print was a low-rated swing high; 25-40% chance of a top.  Candle code also said it was a "spinning top" which on its own was a 30% chance of marking a low.  Given the long shadow which gives it a "hammer-like" quality, I don't think its all that bearish.

The miners staged a reasonably good rally, with GDX +2.18% on moderate volume, while GDXJ climbed +2.64% on moderate volume also.  Traders are buying yesterday's dip in the miners - not enough to retrace the drop, but it was a reasonably positive outcome.  Candle print for GDX was a bullish harami, which the candle code gives a 34-46% chance of moving higher.  Does that wipe out yesterday's engulfing?  Maybe it does.  On the chart we see that price is bounded on the lower end by the rising 9 EMA< and on the upper end by the falling 50.  A close above the 50 would be a strong bullish sign.

Platinum fell -0.74%, palladium fell -2.66%, and copper rose +0.83% making a new high.  Copper is now up 9 days in a row, or 17 cents, which is a big move for copper.  What is going on?  Is this this something real, or just crazy Chinese gambling in the futures markets?  Certainly there is money flowing in big time - its just hard to say if there's an economic basis for it.

USD continued falling today, dropping -0.22 to 97.14.  The falling buck (4 of the last 5 days were down) is one sign of the relatively new Trump-might-win phenomenon, along with falling equity and bond prices, as well as rising gold.   It will all unwind - probably fairly violently - if Trump ends up losing.  We're in a news-driven market right now; TA provides a nice set of waypoints and generally helps to characterize the intensity of the move, but the news will dominate the outcome at the end of the day.

Crude was hammered once more, dropping -0.85 [-1.87%] to 44.66, marking a new low, printing a "long black" candle that is almost certainly not a low, and completely ignoring my suggestion that yesterday might have seen the low at 45.  Crude has dropped for 8 of the last 9 days, and like SPX, it is now oversold (RSI7=17) and "ready for a bounce" - whatever that means.   Supporting this theory of mine is a move higher in energy stocks today; the fact that traders are buying the four week drop in energy equities regardless of the drop in the underlying commodity suggests a low might be near.  That said, if oil drops below 43, that takes oil out of its longer term uptrend.  "A disaster" for those of us long oil.

SPX fell once more, 7 days out of the last 8, dropping -9.28 [-0.44%] to 2088.66, making a new low and finally coming to rest just above the 200 MA.  SPX is definitely oversold, with RSI(7) = 15.  This is "bounce territory"; any positive news at all will result in a (probable) 30 point reversal.   Energy (XLE:+0.40%) led, while technology (XLK:-0.96%) dropped most.  The energy rally was curious, given that oil fell fairly significantly.  Its like the miners rallying on day when gold drops $10 - it sure seems like something is up.  VIX jumped up +2.76 to 22.08.

TLT fell again (again!), losing -0.77% and printing a swing high.  This drops TLT back below its 9 EMA.  Bonds remain very weak; to drop this much on a day when equities fell also is just not a good sign.

JNK was flat, rising just +0.03%, but the candle print was just a spinning top; most probably its not the low.  It did manage to avoid falling, which is more than I can say for TLT.

CRB fell again, dropping -0.49% and making a new low; 4 of the 5 commodity sectors fell, with only industrial metals moving higher.  CRB is starting to become oversold, and it is moving deeper into a short-term downtrend.

The polls-plus forecast at 538 now gives Trump a 35% chance of winning, up 2% from yesterday.  Markets right now are all-elections-all-the-time, as far as I can tell.

Prices continue to be "voting Trump" as well.  We see continued flight from the buck, out of risk assets like equities and junk debt.  Even US bonds are weak.  While the charts show that PM may be running into trouble here, especially the miners, how the election plays out will probably overwhelm everything else.

Still, we have Nonfarm Payrolls coming up at 08:30 Eastern.  That will probably move prices around, although probably less so than normal.

It will all be over soon.  I promise.

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