PM Daily Market Commentary - 12/22/2016

davefairtex
By davefairtex on Fri, Dec 23, 2016 - 4:44am

 

Gold fell -3.40 to 1129.80 on light volume, while silver fell -0.14 to 15.83 on moderate volume. Both gold and silver staged modest rallies on a drop in the dollar, but then sold off once the buck rebounded.

Trading range for gold was fairly narrow today; gold printed a short black candle, which looks bearish. Given the relative lack of buying enthusiasm and the ongoing strength in the dollar, it will probably not be long before gold re-tests the low at 1124.30.

Rate rise chances (May 2017) rose to 32%.

Gold open interest at COMEX rose +2,353 contracts.

Silver sold off harder than gold once more, managing to close right at the lows of the day. Candle print was a “closing black marubozu”, same as yesterday, which looks bearish to me. Gold/silver ratio rose again today, up +0.43 to 71.37. That's also bearish. The close below round number 16 was not a good sign. I'm expecting silver to make new lows in the near future.

Miners rallied early, but then sold off as gold fell, with GDX down -0.10% on moderately light volume, while GDXJ rallied +0.18% on moderately light volume also. Candle print for GDX was a doji – which looked to me like a gravestone doji. Candle code assessed it as bearish, with a 34% chance of marking a near-term high. That's fairly depressing, especially given that GDX is just bumping along the lows.

Platinum fell -1.13%, palladium dropped -0.50%, and copper rose +0.50%. Copper may have printed a reversal bar; it was a low-percentage hammer candle. Candle looks good to me, but the candle code wasn't so impressed. Palladium is extremely oversold, at least on the daily timeframe.

USD rose +0.07 to 103.10, rebounding almost 0.50 after first selling off down to the 9 EMA. Candle print was a spinning top, which the candle code finds bullish: a 33% chance of marking a low. Buck continues to have dip-buyers, which suggests to me that the uptrend remains in place. Buck remains above its 9 EMA. That doesn't bode well for gold.

Crude rose +0.14 to 52.65. Crude traded in a range today, eventually printing a low-grade “bullish harami”, which only has a 17% chance of marking the low. Crude remains above its 9 EMA, which is a plus, but the uptrend does seem to be weakening. 52 is now support for crude; a drop below the 9 and/or 52 could lead to the start of a crude downtrend. The fact crude didn't sell off after yesterday's bearish petroleum status report is a positive, but we are right on the edge of a more serious move downhill.

SPX fell -4.22 to 2260.96. Cyclicals led the market lower (XLY:-1.08%) while energy did best (XLE:+0.41%). Today was a very mild follow-through off yesterday's swing high. The market does not seem to be in any hurry to go anywhere. VIX rose +0.16 to 11.43. Puts remain extremely cheap; buying puts at/about VIX=11 generally turn out positively. Maybe we are at a near-term Peak Trump.

TLT fell -0.18%, closing right at the 9 EMA. Bonds are now more or less chopping sideways, but the buyers do not appear to be eagerly snapping up the “bargain-basement” long bonds (yield: +2.86%).

JNK rallied +0.14%; while we haven't seen any fireworks, the rally in junk has been steady, and JNK is now in a fairly clear uptrend – quite close to breaking above the high set immediately before the FOMC announcement seven trading days ago.

On that subject, a chart I follow is a “CCC credit spread” chart, which acts like a fear gauge. When the market gets stressed, traders flee junk credit for better quality credit, and it results in the credit spread spiking higher. We can see that “max fear” - at least recently – was back in February, and fear has done nothing but subside since then.  While this indicator doesn't line up perfectly with equities, it does seem to be pretty good at picking the lows.  Right now: fear is low, and dropping.  When traders buy JNK and sell TLT, that pushes this index lower. That's why I follow both TLT and JNK – they are (roughly speaking) two tradable components of this index.

You can follow it here: https://fred.stlouisfed.org/series/BAMLH0A3HYC

CRB fell -0.25%; commodities remain in an uptrend, but are fading somewhat.

The dip-buying in the buck along with a slow pre-holiday trading environment continues to pull PM prices steadily lower. The buck remains in an uptrend, and so its more likely than not that gold and silver will probably make new lows in the near future. At some point the (western) buyers will return; on the weekly timeframe gold is quite oversold and is ready for a bounce (at a minimum), but until we actually see it happen, its probably unwise to buy in anticipation of the event. As we know, oversold can get oversolder, and then oversoldest, and then it can drop some more.

You may think I'm writing this just for you – but I'm reminding myself too. Like the Chinese, I dearly love to buy something on sale.

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