PM Daily Market Commentary - 12/28/2016

By davefairtex on Thu, Dec 29, 2016 - 4:44am


Gold rose +3.00 to 1142.50 on light volume, while silver climbed +0.04 to 16.05 on light volume also. Gold and silver were both able to move higher in the face of a moderately strong dollar rally. That's a positive sign for PM.

Gold continued moving higher today, managing to close above the 9 EMA for the first time in eight weeks. Even though the gain was relatively small, the fact that gold was able to resist selling off even though the dollar moved higher confirms the chart evidence that says the buyers are back (and/or the sellers are exhausted) and that gold is now ready to rebound. Candle print was a short white candle, which feels to me like a continuation (i.e. its bullish). Gold has yet to print a swing low, but I believe that will happen in the very near future.

Rate rise chances (May 2017) remains at 30%.

Gold open interest at COMEX fell -5,443 contracts.

Silver rallied too, but didn't gain as much ground as gold. Candle print was a spinning top, which looks mildly bullish. Like with gold, silver's rally in the face of a reasonably strong dollar move is a positive sign. Silver has yet to close above the 9 EMA, and it also has not printed a swing low. Silver's 9 EMA is currently at 16.11.

Miners were strong again today, with GDX up +1.86% on moderate volume and GDXJ climbing +3.34% on moderately heavy volume. Miners are continuing to follow through on the break above the recent consolidation zone. Miners continue to lead the PM segment higher.

Platinum fell -0.68%, palladium dropped -1.03%, and copper dropped -0.73%.

USD rose +0.24 to 103.24, first attempting to make a new high before falling into the close. However even at the highest point for the buck intraday of 103.57, gold and silver were able to avoid selling off; I felt this was a very positive sign for PM. The candle print for DX was a spinning top, which in this case (a possible “lower high”) is a 43% chance of marking the top. That's about the most bearish that a spinning top candle print gets. Might we have a high for the buck? We just might. But until we get that 9 EMA crossing, USD remains in an uptrend; buck needs a close below 102.82 to close below the 9 EMA.

Crude fell -0.23 to 53.66, with all of the losses happening after market close due to a bearish inventory report from API, which showed that crude inventories grew by 4.2 million barrels. Candle print: a bearish-looking spinning top, which has a 20% chance of marking a high. Crude remains above its 9 EMA, and pretty much every dip has been bought. While there is a fair amount of press suggesting the oil rally is overdone, I'm still waiting for a technical signal to indicate that the buying has dried up. Last week's bearish EIA report was bought – let's see what happens this week.

SPX fell -18.96 [-0.84%] to 2249.92, selling off all day long. Energy dropped most (XLE:-1.08%) while the best performer was consumer staples (XLP:-0.61%). Given that even the best performer was off fairly substantially, you can see that the selling was broad-based. Candle print for SPX was a bearish engulfing (also a swing high) which the candle code found extremely bearish: an 81% chance of marking the top. SPX is now conclusively below the 9 EMA, and I suspect the broad market will continue moving lower. VIX jumped +0.96 to 12.95. Puts are still relatively cheap, especially given today's bearish candle print.

TLT climbed +0.73%, moving to the top of its recent consolidation range and closing above its 9 EMA. Money appears to be moving out of equities and into bonds. TLT is confirming the top in SPX.

JNK fell off a bit of a cliff, dropping -0.60% and printing a bearish-looking swing high (80% chance of a top), plunging through its 9 EMA. JNK's fall is also confirming “risk off” and the top in SPX.

CRB rose +0.14%, slowly moving higher. CRB remains in an uptrend in both the short and medium term time frames.

I believe that it is likely we are at an inflection point for several different markets.  Gold and silver are starting to rebound, led by the mining shares. This coincides with a possible low in TLT, and a high for SPX and JNK. If the buck tops out, I believe that will cement the trend change.  A correction in SPX should also help PM to rally.

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Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Lol Gold

What is with the big spike all of a sudden?  Just shot up like a rocket.  A strong year-end close is a pretty good signal, IMO.  Hopefully, it doesn't fall out of bed between now and tomorrow evening.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
gold breakout: 1157.80

Gold just broke out to 1157.80, spiking higher while the buck is correcting.  If the buck closes here, it should print a swing high, and it will have closed below the 9 EMA.  It looks like traders want to cash in their chips on the SPX/USD rally prior to end of year.

GDX is up 6% on the day, and 11% on the week.  Some miners I watch are up 10% - even one that I actually own!

This call brought to you by the COT report, and the 83,000 Managed Money short GC contracts that probably looked far too exciting for the commercials to pass up.  Yes.  Commercials are manipulating the price of gold higher, in order to squeeze managed money.

No promises on how long this move lasts, however.  Once those MM shorts are exhausted, we need to watch things very carefully.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
You called it

You nailed it a couple of days ago, Dave.  Good call!  Any idea what Armstrong is looking at from a yearly close for gold to give perspective on the move into next year?

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