PM Daily Market Commentary - 1/11/2017

By davefairtex on Thu, Jan 12, 2017 - 5:53am


Gold rose +3.90 to 1191.50 on heavy volume, while silver fell -0.06 to 16.76 on moderately heavy volume.

Today the dollar decided to go nuts, first climbing almost a full point, and then suddenly reversing – losing all of its gains, plummeting down almost -0.70 points, only to reverse yet again, moving back towards even. All the gyrations dragged gold and silver along behind; by the end of the day, there was relatively little change in PM prices, but a large number of contracts had changed hands.

Gold initially plunged on the big dollar rally, but seemed to find relatively strong support at the 9 EMA; once the buck relented, gold took off, rising as high as 1198, poking briefly through the 50 MA before retreating into the close. Candle print is a “high wave”, which has a 14% chance of marking the top. All things considered, gold held up relatively well during the very strong dollar rally, although gold's gains today were mostly a currency effect.

Open interest at COMEX for GC rose by 2,642 contracts.

Rate rise chances (May 2017) fell to 33%.

Silver looked much the same as gold, dropping down to its 9 EMA, finding support, and then rallying back up to test the 50 MA, before retreating into the close. Unlike gold, silver was unable to close green, which means it underperformed gold. This sent the gold/silver ratio up +0.51 to 71.09, which is bearish for PM. Silver printed a “spinning top” candle, which does not mark the high. You can see on the chart that silver is right up against its 50 MA. It really needs a conclusive close above the 50 to keep the uptrend alive; until that happens, I will remain nervous that the shorts might appear and take our PM party hats away.

GDX fell -0.22% on moderate volume, while GDXJ dropped -0.03% on moderate volume also. GDX followed the track of gold, selling off in the morning, rallying in the afternoon, only to fall back to mostly-even by the close. Candle print was a spinning top, which the code finds somewhat bearish (a 24% chance of marking a top). I'm starting to see a “flag” formation, which is generally bullish – a close above the upper trendline signals a breakout, while a drop below the lower trendline is a breakdown.

Platinum fell -0.73%, palladium dropped -1.22%, and copper moved down -0.40%. All the metals retreated today – only gold managed a gain.

As mentioned, USD fell -0.25 to 101.72; trading range today was quite large, but the buck ended the day fairly close to where it started. Candle print was a high wave, which the candle code finds bearish; 33% chance of being a top. The other currencies are looking like they might be ready to rally; momentum for the buck does seem to be down, which should help keep the PM rally going.

Crude rallied strongly today, up +1.60 to 52.82, printing a swing low/bullish tasuki line candle pattern, which is bullish, and may well mark the low (48%).  The petroleum status report released at 10:30 was bearish, showing a 4.1 million barrel inventory build, a level well in excess of what the API report predicted yesterday.  The market sold off immediately following the report, but then decided to abruptly reverse 10 minutes later, shooting skyward and sending all the shorts scrambling to cover. When the market rallies on bad news, its time to buy. News either isn't that bad, or its already factored in and there are no sellers left.

SPX rallied +6.42 to 2275.34. Energy led (XLE:+1.09%) while sickcare trailed (XLV:-1.04%). Energy put in a swing low today, while sickcare printed a relatively dramatic swing high. My sense is, the market is still not quite sure which sectors the money should go into, and which sectors it should leave.  VIX fell -0.23 to 11.26. VIX at 11 has been a relatively solid bet over the past year or two.

TLT rose +0.34%, and is now more conclusively through the 50 MA. Bonds are steadily recovering off the lows; being back above the 50 should bring some of the buyers back into bonds.

JNK fell -0.03%, after trading in a very narrow range. Not much happened today in JNK.

CRB rose +0.60%, with 3 of 5 sectors rising, led by energy. CRB is back above its 9 EMA; it has more or less moved sideways for the past six weeks. CRB remains in a longer-term uptrend, slowly recovering off the lows set in Feb 2016.

Gold was fairly resilient during the large dollar rally, and even the miners didn't crater as I thought they might.  Buck is leaning bearish, and the miner "flag" is probably more bullish than bearish.  And now even crude seems to have marked a low.

Gold and silver now must cross the 50 MA and close above it in some sort of conclusive manner.  If they can do this, we could see a more extended PM rally.  However this is where I'd expect the shorts to start attacking, as they have done all through this downtrend.

We should know in the next few days how this will play out.

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